Sunoco Logistics - WACC Analysis

Sunoco Logistics (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Sunoco Logistics's Analysis

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

WACC Analysis Information

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

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