Yahoo - WACC Analysis

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

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Helpful Information for Yahoo's Analysis

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

WACC Analysis Information

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

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