U.S. Global Investors - WACC Analysis

U.S. Global Investors (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for U.S. Global Investors's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of U.S. Global Investors'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 U.S. Global Investors uses a significant proportion of equity capital.