Vivo Participacoes - WACC Analysis

Vivo Participacoes (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Vivo Participacoes's Analysis

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

WACC Analysis Information

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

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