United Therapeutics - WACC Analysis

United Therapeutics (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for United Therapeutics's Analysis

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

WACC Analysis Information

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

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