EI Du Pont - WACC Analysis

EI Du Pont (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for EI Du Pont's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of EI Du Pont'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 EI Du Pont uses a significant proportion of equity capital.