Magyar Telekom - WACC Analysis

Magyar Telekom (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Magyar Telekom's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Magyar Telekom'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 Magyar Telekom uses a significant proportion of equity capital.