Soapstone Networks - WACC Analysis

Soapstone Networks (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Soapstone Networks's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Soapstone Networks'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 Soapstone Networks uses a significant proportion of equity capital.