St Jude Medical - WACC Analysis

St Jude Medical (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for St Jude Medical's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of St Jude Medical'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 St Jude Medical uses a significant proportion of equity capital.