EV Energy Partners - WACC Analysis

EV Energy Partners (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for EV Energy Partners's Analysis

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

WACC Analysis Information

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

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