As of today (2024-05-21), RadioShack's weighted average cost of capital is 7.26%%. RadioShack's ROIC % is 0.00% (calculated using TTM income statement data).
RadioShack 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.
RadioShack WACC % Historical Data
The historical data trend for RadioShack'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.
For the Specialty Retail subindustry, RadioShack'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.
RadioShack's WACC % Distribution in the Retail - Cyclical Industry
For the Retail - Cyclical industry and Consumer Cyclical sector, RadioShack's WACC % distribution charts can be found below:
* The bar in red indicates where RadioShack's WACC % falls into.
RadioShack 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, RadioShack's market capitalization (E) is €26.183 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 annual average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Dec. 2013, RadioShack's latest one-year annual average Book Value of Debt (D) is €520.45 Mil.
a) weight of equity = E / (E + D) = 26.183 / (26.183 + 520.45) = 0.0479
b) weight of debt = D / (E + D) = 520.45 / (26.183 + 520.45) = 0.9521
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 4.412%. 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. RadioShack'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 = 4.412% + 1 * 6% = 10.412%
3. Cost of Debt:
GuruFocus uses latest annual Interest Expense divided by the latest one-year annual average debt to get the simplified cost of debt.
As of Dec. 2013, RadioShack's interest expense (positive number) was €38.179 Mil. Its total Book Value of Debt (D) is €520.45 Mil.
Cost of Debt = 38.179 / 520.45 = 7.3358%.
4. Multiply by one minus annual Tax Rate:
GuruFocus uses the most recent annual Tax Expense divided by the most recent annual Pre-Tax Income to calculate the tax rate. The calculated annual 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 annual Tax Rate = -9.49 / -295.65 = 3.21%.
RadioShack'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)
=
0.0479
*
10.412%
+
0.9521
*
7.3358%
*
(1 - 3.21%)
=
7.26%
* 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.
RadioShack (FRA:TAN) 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, RadioShack's weighted average cost of capital is 7.26%%. RadioShack's ROIC % is 0.00% (calculated using TTM income statement data).
RadioShack 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 annual 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 annual Interest Expense divided by the latest one-year annual average debt to get the simplified cost of debt.
RS Legacy Corp, formerly RadioShack Corp was incorporated in 1967. The Company, along with its subsidiaries, is primarily engaged in the retail sale of consumer electronics goods and services through its RadioShack store chain. At December 31, 2013, it operated 4,297 U.S. company-operated stores under the RadioShack brand located throughout the United States, as well as in Puerto Rico and the U.S. Virgin Islands. These stores are located in strip centers and shopping malls, as well as individual storefronts. Each location carries a broad assortment of both name brand and private brand consumer electronics products. The Company's product lines are categorized into two platforms; namely mobility and retail. Its mobility platform includes postpaid and prepaid wireless handsets, commissions, residual income, prepaid wireless airtime, tablet devices, and e-readers. The retail platform includes remaining consumer electronics product categories and related accessories; batteries and power products; and technical products. The Company has other sales channels and support operations such as: Dealer Outlets, RadioShack de Mexico, RadioShack.com, Distribution Centers, RadioShack Technology Services and RadioShack Global Sourcing. The Company owns or is licensed to use many trademarks and service marks related to its RadioShack stores in the United States and in foreign countries. Its private brand manufactured products are sold under the RadioShack, AUVIO, Enercell and Gigaware trademark. It also owns patents and patent applications relating to consumer electronics products. The Company competes in the sale of its products and services with several retail formats, including national, regional, and independent consumer electronics retailers. It competes with department and specialty retail stores in certain product categories. It competes with wireless providers in mobility platform through their own retail and online presence. It also competes with big-box retailers, discount and warehouse retailers, and Internet retailers. The Company is subject to foreign, federal, state, and local laws and regulations including, but not limited to, the Fair Labor Standards Act and ERISA, each as amended, and regulations promulgated by the Federal Trade Commission, SEC, Internal Revenue Service, Department of Labor, Occupational Safety and Health Administration, and Environmental Protection Agency.
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