Key Energy Srvs - WACC Analysis

Key Energy Srvs (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Key Energy Srvs's Analysis

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

WACC Analysis Information

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

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