Vaalco Energy - WACC Analysis

Vaalco Energy (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Vaalco Energy's Analysis

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

WACC Analysis Information

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

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