Penn Virginia GP - WACC Analysis

Penn Virginia GP (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Penn Virginia GP's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Penn Virginia GP'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 Penn Virginia GP uses a significant proportion of equity capital.