China Infrastructure - WACC Analysis

China Infrastructure (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for China Infrastructure's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of China Infrastructure'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 China Infrastructure uses a significant proportion of equity capital.