Cantel Medical (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Cantel Medical's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Cantel Medical'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 Cantel Medical. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Cantel Medical before they make value investing decisions. This WACC analysis is used in Cantel Medical's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Cantel Medical's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Cantel Medical uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Cantel Medical over the long term. If there are any short-term differences between the industry WACC and Cantel Medical's WACC (discount rate), then Cantel Medical is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Cantel Medical'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 Cantel Medical uses a significant proportion of equity capital.