Exar Corp - WACC Analysis

Exar Corp (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Exar Corp's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Exar Corp'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 Exar Corp uses a significant proportion of equity capital.