Converted Organics - WACC Analysis

Converted Organics (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Converted Organics's Analysis

What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Converted Organics'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 Converted Organics. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Converted Organics before they make value investing decisions. This WACC analysis is used in Converted Organics's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Converted Organics's company valuation.

WACC Analysis Information

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

2. The WACC calculation uses the higher of Converted Organics'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 Converted Organics uses a significant proportion of equity capital.