Transcananda Pipelines - WACC Analysis

Transcananda Pipelines (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Transcananda Pipelines's Analysis

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

WACC Analysis Information

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

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