AT&T - WACC Analysis

AT&T (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for AT&T's Analysis

What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine AT&T'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 AT&T. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in AT&T before they make value investing decisions. This WACC analysis is used in AT&T's discounted cash flow (DCF) valuation and see how the WACC calculation affect's AT&T's company valuation.

WACC Analysis Information

1. The WACC (discount rate) calculation for AT&T uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for AT&T over the long term. If there are any short-term differences between the industry WACC and AT&T's WACC (discount rate), then AT&T is more likely to revert to the industry WACC (discount rate) over the long term.

2. The WACC calculation uses the higher of AT&T'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 AT&T uses a significant proportion of equity capital.