Chesapeake Utilities - WACC Analysis

Chesapeake Utilities (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Chesapeake Utilities's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Chesapeake Utilities'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 Chesapeake Utilities uses a significant proportion of equity capital.