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Rivian Automotive WACC %

:8.82 (As of Today)
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As of today (2022-08-19), Rivian Automotive's weighted average cost of capital is 8.82%. Rivian Automotive's ROIC % is -171.76% (calculated using TTM income statement data). Rivian Automotive 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.


Rivian Automotive WACC % Historical Data

The historical data trend for Rivian Automotive'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.

Rivian Automotive Annual Data
Trend Dec19 Dec20 Dec21
WACC %
- - -

Rivian Automotive Quarterly Data
Dec19 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22
WACC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only - - - 8.27 -

Competitive Comparison

For the Auto Manufacturers subindustry, Rivian Automotive'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.

   

Rivian Automotive WACC % Distribution

For the Vehicles & Parts industry and Consumer Cyclical sector, Rivian Automotive's WACC % distribution charts can be found below:

* The bar in red indicates where Rivian Automotive's WACC % falls into.



Rivian Automotive 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, Rivian Automotive's market capitalization (E) is $30076.952 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, Rivian Automotive's latest two-year average Short-Term Debt & Capital Lease Obligation was $69.5 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $787 Mil. The total Book Value of Debt (D) is $856.5 Mil.
a) weight of equity = E / (E + D) = 30076.952 / (30076.952 + 856.5) = 0.9723
b) weight of debt = D / (E + D) = 856.5 / (30076.952 + 856.5) = 0.0277

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 2.97400000%. 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. Rivian Automotive'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 = 2.97400000% + 1 * 6% = 8.974%

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, Rivian Automotive's interest expense (positive number) was $29 Mil. Its total Book Value of Debt (D) is $856.5 Mil.
Cost of Debt = 29 / 856.5 = 3.3859%.

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%.

Rivian Automotive'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)
=0.9723*8.974%+0.0277*3.3859%*(1 - 0%)
=8.82%

* 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.


Rivian Automotive  (NAS:RIVN) 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, Rivian Automotive's weighted average cost of capital is 8.82%. Rivian Automotive's ROIC % is -171.76% (calculated using TTM income statement data). Rivian Automotive 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

Rivian Automotive Business Description

Rivian Automotive logo
Traded in Other Exchanges
Address
14600 Myford Road, Irvine, CA, USA, 92606
Rivian Automotive Inc designs, develops and manufactures category-defining electric vehicles and accessories.
Executives
Flatley Jay T director 9885 TOWNE CENTRE DR SAN DIEGO CA 92121
Thomas-graham Pamela director C/O IDENIX PHARMACEUTICALS, INC. 60 HAMPSHIRE STREET CAMBRIDGE MA 02139
Baker Jeff officer: Chief Accounting Officer 1221 BROADWAY OAKLAND CA 94612
Boone Karen director 15 KOCH ROAD SUITE J CORTE MADERA CA 94925
Amazon Com Inc director, 10 percent owner 410 TERRY AVENUE NORTH SEATTLE WA 98109
Ford Motor Co 10 percent owner ONE AMERICAN RD DEARBORN MI 48126
Marcario Rose M director 21101 OXNARD STREET WOODLAND HILLS CA 91367
Mcdonough Claire officer: Chief Financial Officer C/O RIVIAN AUTOMOTIVE, INC. 14600 MYFORD ROAD IRVINE CA 92618
Krawiec Peter director C/O RIVIAN AUTOMOTIVE, INC. 14600 MYFORD ROAD IRVINE CA 92618
Scaringe Robert J director, officer: Chief Executive Officer C/O RIVIAN AUTOMOTIVE, INC. 14600 MYFORD ROAD IRVINE CA 92618
Behl Jiten officer: Chief Growth Officer C/O RIVIAN AUTOMOTIVE, INC. 14600 MYFORD ROAD IRVINE CA 92618
Schwartz Sanford Harold director C/O RIVIAN AUTOMOTIVE, INC. 14600 MYFORD ROAD IRVINE CA 92618
Global Oryx Group Holding Co Ltd 10 percent owner 15 ESPLANADE ST. HELIER Y9 JE1 1RB

Rivian Automotive Headlines

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