National Oilwell Varco - WACC Analysis

National Oilwell Varco (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for National Oilwell Varco's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of National Oilwell Varco'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 National Oilwell Varco uses a significant proportion of equity capital.