Central Vermont Pub Svc - WACC Analysis

Central Vermont Pub Svc (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Central Vermont Pub Svc's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Central Vermont Pub Svc'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 Central Vermont Pub Svc uses a significant proportion of equity capital.