NetLogic Microsystems - WACC Analysis

NetLogic Microsystems (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for NetLogic Microsystems's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of NetLogic Microsystems'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 NetLogic Microsystems uses a significant proportion of equity capital.