Clean Energy Fuels - WACC Analysis

Clean Energy Fuels (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Clean Energy Fuels's Analysis

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

WACC Analysis Information

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

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