Medical Action (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Medical Action's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Medical Action'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 Medical Action. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Medical Action before they make value investing decisions. This WACC analysis is used in Medical Action's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Medical Action's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Medical Action uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Medical Action over the long term. If there are any short-term differences between the industry WACC and Medical Action's WACC (discount rate), then Medical Action is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Medical Action'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 Medical Action uses a significant proportion of equity capital.