As of today (2022-05-29), Research Frontiers's weighted average cost of capital is 4.72%. Research Frontiers's ROIC % is -118.58% (calculated using TTM income statement data).
Research Frontiers earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Research Frontiers WACC % Historical Data
The historical data trend for Research Frontiers'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.
Research Frontiers Annual Data
Trend
Dec12
Dec13
Dec14
Dec15
Dec16
Dec17
Dec18
Dec19
Dec20
Dec21
WACC %
3.40
4.18
9.79
8.23
6.36
Research Frontiers Quarterly Data
Jun17
Sep17
Dec17
Mar18
Jun18
Sep18
Dec18
Mar19
Jun19
Sep19
Dec19
Mar20
Jun20
Sep20
Dec20
Mar21
Jun21
Sep21
Dec21
Mar22
WACC %
8.24
7.47
6.97
6.36
4.32
Competitive Comparison
For the Electronic Components subindustry, Research Frontiers'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.
Research Frontiers WACC % Distribution
For the Hardware industry and Technology sector, Research Frontiers's WACC % distribution charts can be found below:
* The bar in red indicates where Research Frontiers's WACC % falls into.
Research Frontiers 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, Research Frontiers's market capitalization (E) is $53.806 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 Mar. 2022, Research Frontiers's latest two-year average Short-Term Debt & Capital Lease Obligation was $0.174 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $0.555 Mil. The total Book Value of Debt (D) is $0.729 Mil.
a) weight of equity = E / (E + D) = 53.806 / (53.806 + 0.729) = 0.9866
b) weight of debt = D / (E + D) = 0.729 / (53.806 + 0.729) = 0.0134
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 2.74300000%. 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. Research Frontiers's beta is 0.34.
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 = 2.74300000% + 0.34 * 6% = 4.783%
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, Research Frontiers's interest expense (positive number) was $0 Mil. Its total Book Value of Debt (D) is $0.729 Mil.
Cost of Debt = 0 / 0.729 = 0%.
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 0%.
Research Frontiers'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)
=
0.9866
*
4.783%
+
0.0134
*
0%
*
(1 - 0%)
=
4.72%
* 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.
Research Frontiers (NAS:REFR) 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, Research Frontiers's weighted average cost of capital is 4.72%. Research Frontiers's ROIC % is -118.58% (calculated using TTM income statement data).
Research Frontiers earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Research Frontiers Inc is engaged in the development and marketing of technology and devices to control the flow of light. The company develops and licenses its patented suspended particle device light-control technology to other companies that manufacture and market the SPD-Smart chemical emulsion, the light-control film made from the chemical emulsion, the light-control panels made by laminating the film, electronics to power end-products incorporating the film, or lamination services for, and the end-products. Its revenue source comes from the licensing of technology.
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