Exxon Mobil - WACC Analysis

Exxon Mobil (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Exxon Mobil's Analysis

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

WACC Analysis Information

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

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