Middlesex Water - WACC Analysis

Middlesex Water (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Middlesex Water's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Middlesex Water'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 Middlesex Water uses a significant proportion of equity capital.