GigaMedia - WACC Analysis

GigaMedia (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for GigaMedia's Analysis

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

WACC Analysis Information

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

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