Orbitz Worldwide - WACC Analysis

Orbitz Worldwide (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Orbitz Worldwide's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Orbitz Worldwide'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 Orbitz Worldwide uses a significant proportion of equity capital.