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First Solar WACC %

:9.43% As of Today
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As of today (2021-09-23), First Solar's weighted average cost of capital is 9.43%. First Solar's ROIC % is 8.92% (calculated using TTM income statement data). First Solar earns returns that do not match up to its cost of capital. It will destroy value as it grows.


First Solar WACC % Historical Data

The historical data trend for First Solar'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.

First Solar Annual Data
Trend Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20
WACC %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 9.31 12.00 6.86 10.00 10.50

First Solar Quarterly Data
Sep16 Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21
WACC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 10.82 12.28 10.50 11.52 10.84

Competitive Comparison

For the Solar industry, First Solar'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.

   

First Solar WACC % Distribution

For the Solar industry and Technology sector, First Solar's WACC % distribution charts can be found below:

* The bar in red indicates where First Solar's WACC % falls into.



First Solar 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, First Solar's market capitalization (E) is $10175.820 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. 2021, First Solar's latest two-year average Short-Term Debt & Capital Lease Obligation was $42.079 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $496.7135 Mil. The total Book Value of Debt (D) is $538.7925 Mil.
a) weight of equity = E / (E + D) = 10175.820 / (10175.820 + 538.7925) = 0.9497
b) weight of debt = D / (E + D) = 538.7925 / (10175.820 + 538.7925) = 0.0503

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 1.32000000%. 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. First Solar's beta is 1.39.
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 = 1.32000000% + 1.39 * 6% = 9.66%

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. 2020, First Solar's interest expense (positive number) was $24.036 Mil. Its total Book Value of Debt (D) is $538.7925 Mil.
Cost of Debt = 24.036 / 538.7925 = 4.4611%.

4. Multiply by one minus Average Tax Rate:
GuruFocus uses the latest two-year average tax rate to do the calculation.
The latest Two-year Average Tax Rate is -16.02%.

First Solar'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)
=0.9497*9.66%+0.0503*4.4611%*(1 - -16.02%)
=9.43%

* 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.


First Solar  (NAS:FSLR) 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, First Solar's weighted average cost of capital is 9.43%. First Solar's ROIC % is 8.92% (calculated using TTM income statement data). First Solar earns returns that do not match up to its cost of capital. It will destroy value as it grows.


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

First Solar Business Description

First Solar logo
Industry
Technology » Semiconductors NAICS : 334413 SIC : 3674
Address
350 West Washington Street, Suite 600, Tempe, AZ, USA, 85281
First Solar designs and manufactures solar photovoltaic panels, modules, and systems for use in utility-scale development projects. The company's solar modules use cadmium telluride to convert sunlight into electricity. This is commonly called thin-film technology. First Solar is the world's largest thin-film solar module manufacturer. It has production lines in Vietnam, Malaysia, and Ohio.
Executives
Kennedy R Craig director 1844 "R" STREET, NW WASHINGTON DC 20009
Dymbort Jason E. officer: General Counsel 77 RIO ROBLES SAN JOSE CA 95134
Allen Sharon L. director 10040 E. HAPPY VALLEY ROAD #276 SCOTTSDALE AZ 85255
Post William J director 400 NORTH FIFTH STREET . PHOENIX AZ 85004
Stebbins Paul H director C/O WORLD FUEL SERVICES CORP 9800 N.W. 41ST STREET, SUITE 400 MIAMI FL 33178
Sweeney Michael T director GOLDNER HAWN 3700 WELLS FARGO CENTER, 90 SOUTH 7TH ST MINNEAPOLIS MN 55402
Hambro George A director 28101 CEDAR PARK BLVD. PERRYSBURG OH 43551
Ahearn Michael J director 350 WEST WASHINGTON STREET SUITE 600 TEMPE AZ 85281
Chapman Richard D director 350 WEST WASHINGTON STREET, SUITE 600 TEMPE AZ 85281
Joseph Molly director 9209 GRAND SUMMIT BLVD DRIPPING SPRINGS TX 78620
Walton Lukas T 10 percent owner C/O CRAVATH, SWAINE & MOORE LLP 825 EIGHTH AVENUE NEW YORK NY 10019
Gloeckler Markus officer: Co-Chief Technology Officer 28101 CEDAR PARK BLVD. PERRYSBURG OH 43551
Widmar Mark R director, officer: Chief Executive Officer C/O GRAFTECH INTERNATIONAL LTD 12900 SNOW ROAD PARMA OH 44130
Jeffers Byron Michael officer: VP - Global Controller and CAO 350 WEST WASHINGTON ST. TEMPE AZ 85281
Verma Kuntal Kumar officer: Chief Mfg. Engineering Officer 28101 CEDAR PARK BLVD. PERRYSBURG OH 43551

First Solar Headlines

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