Multimedia Games - WACC Analysis

Multimedia Games (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Multimedia Games's Analysis

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

WACC Analysis Information

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

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