Telecom Italia - WACC Analysis

Telecom Italia (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Telecom Italia's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Telecom Italia'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 Telecom Italia uses a significant proportion of equity capital.