Evergreen Solar - WACC Analysis

Evergreen Solar (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Evergreen Solar's Analysis

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

WACC Analysis Information

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

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