Connecticut Water Service - WACC Analysis

Connecticut Water Service (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Connecticut Water Service's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Connecticut Water Service'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 Connecticut Water Service uses a significant proportion of equity capital.