AGL Resources - WACC Analysis

AGL Resources (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for AGL Resources's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of AGL Resources'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 AGL Resources uses a significant proportion of equity capital.