Smith Micro Software - WACC Analysis

Smith Micro Software (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Smith Micro Software's Analysis

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

WACC Analysis Information

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

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