Hornbeck Offshore - WACC Analysis

Hornbeck Offshore (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Hornbeck Offshore's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Hornbeck Offshore'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 Hornbeck Offshore uses a significant proportion of equity capital.