Riverbed Tech - WACC Analysis

Riverbed Tech (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Riverbed Tech's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Riverbed Tech'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 Riverbed Tech uses a significant proportion of equity capital.