Ultrapar Participacoes - WACC Analysis

Ultrapar Participacoes (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Ultrapar Participacoes's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Ultrapar Participacoes'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 Ultrapar Participacoes uses a significant proportion of equity capital.