Tele Norte Leste - WACC Analysis

Tele Norte Leste (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Tele Norte Leste's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Tele Norte Leste'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 Tele Norte Leste uses a significant proportion of equity capital.