Sabesp - WACC Analysis

Sabesp (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Sabesp's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Sabesp'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 Sabesp uses a significant proportion of equity capital.