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