Cree Inc - WACC Analysis

Cree Inc (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Cree Inc's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Cree Inc'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 Cree Inc uses a significant proportion of equity capital.