PharmaNet Development - WACC Analysis

PharmaNet Development (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for PharmaNet Development's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of PharmaNet Development'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 PharmaNet Development uses a significant proportion of equity capital.