MGM Mirage - WACC Analysis

MGM Mirage (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for MGM Mirage's Analysis

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

WACC Analysis Information

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

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