Internet Brands - WACC Analysis

Internet Brands (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Internet Brands's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Internet Brands'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 Internet Brands uses a significant proportion of equity capital.