Blueknight Energy - WACC Analysis

Blueknight Energy (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Blueknight Energy's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Blueknight Energy'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 Blueknight Energy uses a significant proportion of equity capital.