China Telecom - WACC Analysis

China Telecom (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for China Telecom's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of China Telecom'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 China Telecom uses a significant proportion of equity capital.