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