Enbridge Energy Mgmt - WACC Analysis

Enbridge Energy Mgmt (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Enbridge Energy Mgmt's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Enbridge Energy Mgmt'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 Enbridge Energy Mgmt uses a significant proportion of equity capital.