Leap Wireless Intl - WACC Analysis

Leap Wireless Intl (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Leap Wireless Intl's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Leap Wireless Intl'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 Leap Wireless Intl uses a significant proportion of equity capital.