Weatherford - WACC Analysis

Weatherford (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Weatherford's Analysis

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

WACC Analysis Information

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

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