Mellanox Tech - WACC Analysis

Mellanox Tech (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Mellanox Tech's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Mellanox Tech'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 Mellanox Tech uses a significant proportion of equity capital.