France Telecom - WACC Analysis

France Telecom (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for France Telecom's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of France Telecom'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 France Telecom uses a significant proportion of equity capital.