Lihir Gold - WACC Analysis

Lihir Gold (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Lihir Gold's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Lihir Gold'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 Lihir Gold uses a significant proportion of equity capital.