Super Micro Computer - WACC Analysis

Super Micro Computer (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Super Micro Computer's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Super Micro Computer'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 Super Micro Computer uses a significant proportion of equity capital.