Socket Mobile - WACC Analysis

Socket Mobile (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Socket Mobile's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Socket Mobile'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 Socket Mobile uses a significant proportion of equity capital.