Sirius XM Satellite Radio - WACC Analysis

Sirius XM Satellite Radio (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Sirius XM Satellite Radio's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Sirius XM Satellite Radio'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 Sirius XM Satellite Radio uses a significant proportion of equity capital.