Toreador Resources - WACC Analysis

Toreador Resources (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Toreador Resources's Analysis

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

WACC Analysis Information

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

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