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