Patriot Coal Corp (Weighted Average Cost of Capital (WACC) Analysis)
Improve your investment analysis with by seeing the Patriot Coal Corp's Discounted Cash Flow analysis, Patriot Coal Corp's Warren Buffet analysis, and Patriot Coal Corp's Comparable Multiple analysis.
Helpful Information for Patriot Coal Corp's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Patriot Coal Corp'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 Patriot Coal Corp. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Patriot Coal Corp before they make value investing decisions. This WACC analysis is used in Patriot Coal Corp's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Patriot Coal Corp's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Patriot Coal Corp uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Patriot Coal Corp over the long term. If there are any short-term differences between the industry WACC and Patriot Coal Corp's WACC (discount rate), then Patriot Coal Corp is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Patriot Coal Corp'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 Patriot Coal Corp uses a significant proportion of equity capital.