Empire District Electric - WACC Analysis

Empire District Electric (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Empire District Electric's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Empire District Electric'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 Empire District Electric uses a significant proportion of equity capital.