Whiting Petroleum - WACC Analysis

Whiting Petroleum (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for Whiting Petroleum's Analysis

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

WACC Analysis Information

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

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