Power Integrations - WACC Analysis

Power Integrations (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Power Integrations's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Power Integrations'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 Power Integrations uses a significant proportion of equity capital.