Genon Energy - WACC Analysis

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



Helpful Information for Genon Energy's Analysis

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

WACC Analysis Information

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

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