Plains All American Pipeline - WACC Analysis

Plains All American Pipeline (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Plains All American Pipeline's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Plains All American Pipeline'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 Plains All American Pipeline uses a significant proportion of equity capital.