Global Sources - WACC Analysis

Global Sources (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Global Sources's Analysis

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

WACC Analysis Information

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

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