Atlas America - WACC Analysis

Atlas America (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Atlas America's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Atlas America'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 Atlas America uses a significant proportion of equity capital.