Hanwha SolarOne Power - WACC Analysis

Hanwha SolarOne Power (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Hanwha SolarOne Power's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Hanwha SolarOne Power'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 Hanwha SolarOne Power uses a significant proportion of equity capital.