Dominion Resources - WACC Analysis

Dominion Resources (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Dominion Resources's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Dominion Resources'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 Dominion Resources uses a significant proportion of equity capital.