Sociedad Quimica y Minera - WACC Analysis

Sociedad Quimica y Minera (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Sociedad Quimica y Minera's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Sociedad Quimica y Minera'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 Sociedad Quimica y Minera uses a significant proportion of equity capital.