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