Focus Media - WACC Analysis

Focus Media (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Focus Media's Analysis

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

WACC Analysis Information

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

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