Harbin Electric - WACC Analysis

Harbin Electric (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Harbin Electric's Analysis

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

WACC Analysis Information

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

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