MTS Systems - WACC Analysis

MTS Systems (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for MTS Systems's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of MTS Systems'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 MTS Systems uses a significant proportion of equity capital.