PC Connection (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for PC Connection's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine PC Connection'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 PC Connection. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in PC Connection before they make value investing decisions. This WACC analysis is used in PC Connection's discounted cash flow (DCF) valuation and see how the WACC calculation affect's PC Connection's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for PC Connection uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for PC Connection over the long term. If there are any short-term differences between the industry WACC and PC Connection's WACC (discount rate), then PC Connection is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of PC Connection'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 PC Connection uses a significant proportion of equity capital.