Spectrum Control - WACC Analysis

Spectrum Control (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Spectrum Control's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Spectrum Control'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 Spectrum Control uses a significant proportion of equity capital.