Flir Systems - WACC Analysis

Flir Systems (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Flir Systems's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Flir Systems'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 Flir Systems uses a significant proportion of equity capital.