Cadence Design Sys - WACC Analysis

Cadence Design Sys (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Cadence Design Sys's Analysis

What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Cadence Design Sys's investment risk. WACC Formula = Cost of Equity (CAPM) * Common Equity + (Cost of Debt) * Total Debt. The result of this calculation is an essential input for the discounted cash flow (DCF) analysis for Cadence Design Sys. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Cadence Design Sys before they make value investing decisions. This WACC analysis is used in Cadence Design Sys's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Cadence Design Sys's company valuation.

WACC Analysis Information

1. The WACC (discount rate) calculation for Cadence Design Sys uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Cadence Design Sys over the long term. If there are any short-term differences between the industry WACC and Cadence Design Sys's WACC (discount rate), then Cadence Design Sys is more likely to revert to the industry WACC (discount rate) over the long term.

2. The WACC calculation uses the higher of Cadence Design Sys's WACC or the risk free rate, because no investment can have a cost of capital that is better than risk free. This situation may occur if the beta is negative and Cadence Design Sys uses a significant proportion of equity capital.