Rochester Medical - WACC Analysis

Rochester Medical (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Rochester Medical's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Rochester Medical'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 Rochester Medical uses a significant proportion of equity capital.