Nordic American Tanker - WACC Analysis

Nordic American Tanker (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Nordic American Tanker's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Nordic American Tanker'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 Nordic American Tanker uses a significant proportion of equity capital.