Fresenius Medical Care - WACC Analysis

Fresenius Medical Care (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Fresenius Medical Care's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Fresenius Medical Care'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 Fresenius Medical Care uses a significant proportion of equity capital.