Neurocrine Biosciences - WACC Analysis

Neurocrine Biosciences (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Neurocrine Biosciences's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Neurocrine Biosciences'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 Neurocrine Biosciences uses a significant proportion of equity capital.