Quality Systems - WACC Analysis

Quality Systems (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Quality Systems's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Quality Systems'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 Quality Systems uses a significant proportion of equity capital.