Electronics for Imaging - WACC Analysis

Electronics for Imaging (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Electronics for Imaging's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Electronics for Imaging'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 Electronics for Imaging uses a significant proportion of equity capital.