Kinder Morgan Mgmt - WACC Analysis

Kinder Morgan Mgmt (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Kinder Morgan Mgmt's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Kinder Morgan Mgmt'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 Kinder Morgan Mgmt uses a significant proportion of equity capital.