Piedmont Natural Gas - WACC Analysis

Piedmont Natural Gas (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Piedmont Natural Gas's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Piedmont Natural Gas'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 Piedmont Natural Gas uses a significant proportion of equity capital.