Illumina - WACC Analysis

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

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Helpful Information for Illumina's Analysis

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

WACC Analysis Information

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

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