Enterprise Products - WACC Analysis

Enterprise Products (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Enterprise Products's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Enterprise Products'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 Enterprise Products uses a significant proportion of equity capital.