Vital Images - WACC Analysis

Vital Images (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Vital Images's Analysis

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

WACC Analysis Information

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

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