As of today (2024-05-11), Carmike Cinemas's weighted average cost of capital is 7.03%%. Carmike Cinemas's ROIC % is 0.00% (calculated using TTM income statement data).
Carmike Cinemas earns returns that do not match up to its cost of capital. It will destroy value as it grows.
*Note: The beta of this company cannot be obtained because it has a price history shorter than 3 years. It will thus be set to 1 as default to calculate WACC.
For a comprehensive WACC calculation, please access the WACC Calculator.
Carmike Cinemas WACC % Historical Data
The historical data trend for Carmike Cinemas's WACC % can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Competitive Comparison of Carmike Cinemas's WACC %
For the Broadcasting subindustry, Carmike Cinemas's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Carmike Cinemas's WACC % Distribution in the Media - Diversified Industry
For the Media - Diversified industry and Communication Services sector, Carmike Cinemas's WACC % distribution charts can be found below:
* The bar in red indicates where Carmike Cinemas's WACC % falls into.
Carmike Cinemas WACC % Calculation
The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.
WACC
=
E
/
(E + D)
*
Cost of Equity
+
D
/
(E + D)
*
Cost of Debt
*
(1 - Tax Rate)
1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, Carmike Cinemas's market capitalization (E) is $814.580 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Sep. 2016, Carmike Cinemas's latest one-year quarterly average Book Value of Debt (D) is $459.6836 Mil.
a) weight of equity = E / (E + D) = 814.580 / (814.580 + 459.6836) = 0.6393
b) weight of debt = D / (E + D) = 459.6836 / (814.580 + 459.6836) = 0.3607
2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 4.5%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. Carmike Cinemas's beta cannot be obtained because it has a price history shorter than 3 years. It will thus be set to 1 as default to calculate WACC.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 4.5% + 1 * 6% = 10.5%
3. Cost of Debt:
GuruFocus uses latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
As of Sep. 2016, Carmike Cinemas's interest expense (positive number) was $49.472 Mil. Its total Book Value of Debt (D) is $459.6836 Mil.
Cost of Debt = 49.472 / 459.6836 = 10.7622%.
4. Multiply by one minus TTM Tax Rate:
GuruFocus uses the most recent TTM Tax Expense divided by the most recent TTM Pre-Tax Income to calculate the tax rate. The calculated TTM tax rate is limited to between 0% and 100%. If the calculated tax rate is higher than 100%, it is set to 100%. If the calculated tax rate is less than 0%, it is set to 0%.
The latest calculated TTM Tax Rate = 6.182 / 6.73 = 91.86%.
Carmike Cinemas's Weighted Average Cost Of Capital (WACC) for Today is calculated as:
WACC
=
E / (E + D)
*
Cost of Equity
+
D / (E + D)
*
Cost of Debt
*
(1 - Tax Rate)
=
0.6393
*
10.5%
+
0.3607
*
10.7622%
*
(1 - 91.86%)
=
7.03%
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Carmike Cinemas (NAS:CKEC) WACC % Explanation
Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.
As of today, Carmike Cinemas's weighted average cost of capital is 7.03%%. Carmike Cinemas's ROIC % is 0.00% (calculated using TTM income statement data).
Carmike Cinemas earns returns that do not match up to its cost of capital. It will destroy value as it grows.
*Note: The beta of this company cannot be obtained because it has a price history shorter than 3 years. It will thus be set to 1 as default to calculate WACC.
Be Aware
1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.
For companies that report quarterly, GuruFocus combines all of the most recent year's quarterly debt data from the beginning of the year to the year-end and calculates the average.
For companies that report semi-annually, GuruFocus combines all of the most recent year's semi-annual debt data from the start of the year to the year-end and calculates the average.
For companies that report annually, GuruFocus combines the beginning and ending annual debt data from the most recent year and then calculates the average.
2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.
3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
4. GuruFocus uses the latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
Related Terms
Carmike Cinemas (Carmike Cinemas) Business Description
Carmike Cinemas Inc was organized in the state of Delaware in April 1982. The Company is a motion picture exhibitor in the United States and as of December 31, 2013, it owned, operated or had an interest in 252 theatres with 2,660 screens located in 37 states. The Company target small to mid-size non-urban markets with the belief that they provide a number of operating benefits, including lower operating costs and fewer alternative forms of entertainment. Its theatres are equipped to provide digital cinema and as of December 31, 2013, it had 240 theatres with 2,552 screens on a digital-based platform. In addition, Company had 233 theatres with 983 screens equipped for 3-D as of December 31, 2013. At December 31, 2013, it operated 15 theatres with 107 screens as discount theatres. The Company obtains licenses to exhibit films by directly negotiating with film distributors. It license films through its booking office located in Columbus, Georgia. The Company typically enters into film licenses that provide for rental fees based on firm terms which are negotiated and established prior to the opening of the picture; mutually agreed settlement upon the conclusion of the film run; or a sliding scale formula which is based on a percentage of the box office receipts using a pre-determined and agreed-upon film rental scale. The Company utilizes a point-of-sale system in its theatres developed by Allure Global Solutions, Inc., its point-of-sale system allows to centralize theatre-level administrative functions at its corporate headquarters. It allows corporate management to monitor ticket and concession sales and box office and concession staffing on a daily basis, enabling theatre managers to focus on the day-to-day operation of the theatre. The point-of-sale systems also facilitate services such as advanced ticket sales and Internet ticket sales. The Company owns or has rights to trademarks or trade-names that are used in conjunction with the operations of its theatres. It owns Carmike Cinemas and Hollywood Connection, the Carmike C and its film strip design, Big D, Carmike Rewards, Ovation Club, Muvico, MuviXL, and Wynnsong Cinemas trademarks. In addition, its logo is its trademark. Coca-Cola, Rave Reviews Cinemas, L.L.C., Cinemark USA, Inc., Christie, RealD, Screenvision, Showtime Concession Supply, Inc., Continental Concession Supplies, Inc., Allure Global Solutions, Inc. Bogarts and IMAX are registered trademarks. The Company competes with other motion picture exhibitors and a number of other film delivery methods, including DVDs, video-on-demand, pay-per view services and downloads via the Internet. It also competes for the publics leisure time and disposable income with all forms of entertainment, including sporting events, concerts, live theatre and restaurants. The Companys theatre operations are also subject to federal, state and local laws governing such matters as construction, renovation and operation of its theatres as well
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