Southern Peru Copper - WACC Analysis

Southern Peru Copper (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Southern Peru Copper's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Southern Peru Copper'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 Southern Peru Copper uses a significant proportion of equity capital.