Theravance - WACC Analysis

Theravance (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Theravance's Analysis

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

WACC Analysis Information

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

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