Technology Solutions - WACC Analysis

Technology Solutions (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Technology Solutions's Analysis

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

WACC Analysis Information

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

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