LDK Solar - WACC Analysis

LDK Solar (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for LDK Solar's Analysis

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

WACC Analysis Information

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

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