Weighted Average Cost of Capital Analysis of Samsung Electronics

Samsung Electronics

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Samsung Electronics

Samsung is a South Korea company. It is among the leading manufacturers of electronics across the globe. The company mainly focuses on the manufacturing of a broad range of industries and personal microelectronics (Ceil, 2019). As a result, Samsung has become a recognized name across the globe in technology and manufacturers, approximately 20% of the aggregate exports in South Korea. Therefore, the following is an analysis of Samsung’s “Weighted Average Cost of Capital (WACC).”

The WACC refers to the computation of a syndicate’s capital cost, whereby all capital categories are weighted proportionately. Mari & Marra (2019) explain that all sources of capital, such as “bonds, preferred stock, common stock, and other long-term debts” are included when computing WACC. It is important to note that a firms’ WACC upsurges as the “rate of return on equity and beta” increases because a rise in WACC indicates an increase in risk and a reduction in valuation.

Currently, the WACC of Samsung electronics is 1.74%. Such indicates that the firm produces high “returns on investment (ROI)” than the amount it spends on raising the capital required for investment. As such, the company earns high returns. A company that predicts to generate more favorable returns on investments in the future will experience a rise in growth.

The following table and graph show Samsung’s WACC % from 2015 to 2019.

The table and graph above show Samsung’s WACC from December 2015 to December 2019.