Fair Isaac - WACC Analysis

Fair Isaac (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Fair Isaac's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Fair Isaac'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 Fair Isaac uses a significant proportion of equity capital.