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Constellation Energy WACC %

:6.99 (As of Today)
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As of today (2022-08-18), Constellation Energy's weighted average cost of capital is 6.99%. Constellation Energy's ROIC % is 3.98% (calculated using TTM income statement data). Constellation Energy 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.


Constellation Energy WACC % Historical Data

The historical data trend for Constellation Energy'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.

* Premium members only.

Constellation Energy Annual Data
Trend Dec18 Dec19 Dec20 Dec21
WACC %
- - - -

Constellation Energy Quarterly Data
Dec18 Dec19 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22
WACC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only - - - 7.59 7.75

Competitive Comparison

For the Utilities - Renewable subindustry, Constellation Energy'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.

   

Constellation Energy WACC % Distribution

For the Utilities - Independent Power Producers industry and Utilities sector, Constellation Energy's WACC % distribution charts can be found below:

* The bar in red indicates where Constellation Energy's WACC % falls into.



Constellation Energy 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, Constellation Energy's market capitalization (E) is $26732.674 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 two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Jun. 2022, Constellation Energy's latest two-year average Short-Term Debt & Capital Lease Obligation was $2312 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $5392 Mil. The total Book Value of Debt (D) is $7704 Mil.
a) weight of equity = E / (E + D) = 26732.674 / (26732.674 + 7704) = 0.7763
b) weight of debt = D / (E + D) = 7704 / (26732.674 + 7704) = 0.2237

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 2.88200000%. 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. Constellation Energy'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 = 2.88200000% + 1 * 6% = 8.882%

3. Cost of Debt:
GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.
As of Dec. 2021, Constellation Energy's interest expense (positive number) was $297 Mil. Its total Book Value of Debt (D) is $7704 Mil.
Cost of Debt = 297 / 7704 = 3.8551%.

4. Multiply by one minus Average Tax Rate:
GuruFocus uses the latest two-year average tax rate to do the calculation. The calculated average tax rate is limited to between 0% and 100%. If the calculated average tax rate is higher than 100%, it is set to 100%. If the calculated average tax rate is less than 0%, it is set to 0%.
The latest Two-year Average Tax Rate is 88.905%.

Constellation Energy'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)
=0.7763*8.882%+0.2237*3.8551%*(1 - 88.905%)
=6.99%

* 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.


Constellation Energy  (NAS:CEG) 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, Constellation Energy's weighted average cost of capital is 6.99%. Constellation Energy's ROIC % is 3.98% (calculated using TTM income statement data). Constellation Energy 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 two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.

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 last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.


Related Terms

Constellation Energy Business Description

Constellation Energy logo
Traded in Other Exchanges
Address
1310 Point Street, Baltimore, MD, USA, 21231
Constellation Energy Corp offers energy solutions. It provides clean energy and sustainable solutions to homes, businesses, the public sector, community aggregations, and a range of wholesale customers (such as municipalities, cooperatives, and other strategics). The company offers comprehensive energy solutions and a variety of pricing options for electric, natural gas, and renewable energy products for companies of any size.
Executives
Hanson Bryan Craig officer: EVP & Chief Generation Officer 10 S. DEARBORN STREET 54TH FLOOR CHICAGO IL 60603
Koehler Michael officer: EVP & Chief Admin Officer 1310 POINT STREET BALTIMORE MD 21231
Bauer Matthew N officer: SVP & Controller 1310 POINT STREET BALTIMORE MD 21231
Barron Kathleen officer: EVP & Chief Strategy Officer 1310 POINT STREET BALTIMORE MD 21231
Dardis David O. officer: EVP & General Counsel 1310 POINT STREET BALTIMORE MD 21231
Eggers Daniel L. officer: EVP & CFO 1310 POINT STREET BALTIMORE MD 21231
Mchugh James officer: EVP & Chief Commercial Officer 10 S DEARBORN STREET 54TH FLOOR CHICAGO IL 60603
Ashish Khandpur K director 3M COMPANY LEGAL AFFAIRS 3M CENTER ST PAUL MN 55144-1000
Dominguez Joseph director, officer: President & CEO 10 SOUTH DEARBORN STREET CHICAGO IL 60603
Holzrichter Julie director 20 S. WACKER DRIVE CHICAGO IL 60606
De Balmann Yves C director 360 MADISON AVE 20TH FL C/O BREGAL INVESTMENTS NEW YORK NY 10017
Lawless Robert J director C/O CARPENTER TECHNOLOGY CORP 1047 NORTH PARK ROAD WYOMISSING PA 19610
Halverson Bradley M director 100 N.E. ADAMS STREET PEORIA IL 61629
Richardson John M director 10 S. DEARBORN STREET 54TH FLOOR CHICAGO IL 60603
Ferguson Rhonda S director 1400 DOUGLAS ST OMAHA NE 68179
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