New Zealand Telecom - WACC Analysis

New Zealand Telecom (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for New Zealand Telecom's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of New Zealand Telecom'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 New Zealand Telecom uses a significant proportion of equity capital.