Anadarko Petroleum - WACC Analysis

Anadarko Petroleum (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Anadarko Petroleum's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Anadarko Petroleum'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 Anadarko Petroleum uses a significant proportion of equity capital.