Quest Diagnostics - WACC Analysis

Quest Diagnostics (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Quest Diagnostics's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Quest Diagnostics'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 Quest Diagnostics uses a significant proportion of equity capital.