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Public Service Enterprise Group WACC %

:4.97% (As of Today)
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As of today (2022-07-06), Public Service Enterprise Group's weighted average cost of capital is 4.97%. Public Service Enterprise Group's ROIC % is 1.33% (calculated using TTM income statement data). Public Service Enterprise Group earns returns that do not match up to its cost of capital. It will destroy value as it grows.


Public Service Enterprise Group WACC % Historical Data

The historical data trend for Public Service Enterprise Group'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.

Public Service Enterprise Group Annual Data
Trend Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20 Dec21
WACC %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 3.56 4.52 3.50 3.46 4.26

Public Service Enterprise Group Quarterly Data
Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22
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 4.12 3.92 4.02 4.26 4.63

Competitive Comparison

For the Utilities - Regulated Electric subindustry, Public Service Enterprise Group'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.

   

Public Service Enterprise Group WACC % Distribution

For the Utilities - Regulated industry and Utilities sector, Public Service Enterprise Group's WACC % distribution charts can be found below:

* The bar in red indicates where Public Service Enterprise Group's WACC % falls into.



Public Service Enterprise Group 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, Public Service Enterprise Group's market capitalization (E) is $31443.323 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, Public Service Enterprise Group's latest two-year average Short-Term Debt & Capital Lease Obligation was $3483 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $15079 Mil. The total Book Value of Debt (D) is $18562 Mil.
a) weight of equity = E / (E + D) = 31443.323 / (31443.323 + 18562) = 0.6288
b) weight of debt = D / (E + D) = 18562 / (31443.323 + 18562) = 0.3712

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 2.93400000%. 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. Public Service Enterprise Group's beta is 0.64.
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 = 2.93400000% + 0.64 * 6% = 6.774%

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, Public Service Enterprise Group's interest expense (positive number) was $500 Mil. Its total Book Value of Debt (D) is $18562 Mil.
Cost of Debt = 500 / 18562 = 2.6937%.

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 28.855%.

Public Service Enterprise Group'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)
=0.6288*6.774%+0.3712*2.6937%*(1 - 28.855%)
=4.97%

* 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.


Public Service Enterprise Group  (NYSE:PEG) 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, Public Service Enterprise Group's weighted average cost of capital is 4.97%. Public Service Enterprise Group's ROIC % is 1.33% (calculated using TTM income statement data). Public Service Enterprise Group 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

Public Service Enterprise Group Business Description

Public Service Enterprise Group logo
Industry
Utilities » Utilities - Regulated NAICS : 221121 SIC : 4931
Address
80 Park Plaza, Newark, NJ, USA, 07102
Public Service Enterprise Group is the holding company for a regulated utility (PSE&G) and other nonregulated businesses such as nuclear power generation and clean energy infrastructure. PSE&G provides regulated gas and electricity delivery services in New Jersey to a combined 4 million customers. PSEG also operates the Long Island Power Authority system. In 2022, PSEG sold its gas and oil power plants in the Mid-Atlantic, New York, and the Northeast.
Executives
Larossa Ralph A officer: COO PSEG 80 PARK PLAZA NEWARK NJ 07102
Chernick Rose M officer: Vice President and Controller 80 PARK PLAZA, T4B NEWARK NJ 07102
Jackson Shirley A director 110 8TH STREEET TROY NY 12180-3590
Zollar Alfred W director C/O LOTUS SOFTWARE ONE ROGER STREET CAMBRIDGE MA 02142
Stephenson Scott G director C/O VERISK ANALYTICS, INC. 545 WASHINGTON BOULEVARD JERSEY CITY NJ 07310-1686
Deese Willie A director DENTSPLY SIRONA INC 13320 BALLANTYNE CORPORATE PLACE CHARLOTTE NC 28277
Tomasky Susan director AMERICAN ELECTRIC POWER 1 RIVERSIDE PLAZA COLUMBUS OH 43215
Ostrowsky Barry H director RWJBARNABAS HEALTH 95 OLD SHORT HILLS ROAD WEST ORANGE NJ 07052
Lilley David director PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> Ownership Information: LILLEY DAVID a.header:link {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:visited {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:hover {color: #191970;}
Surma John P director PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> Ownership Information: SURMA JOHN P a.header:link {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:visited {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:hover {color: #191970;}
Sugg Laura A director ONE BRIARLAKE PLAZA, SUITE 2000 2000 WEST SAM HOUSTON PARKWAY SOUTH HOUSTON TX 77042
Cregg Daniel J officer: Executive VP & CFO 80 PARK PLAZA, T4 NEWARK NJ 07102
Izzo Ralph director, officer: Chairman, President and CEO PSEG 80 PARK PLAZA T6B NEWARK NJ 07102-4194
Daly David Matthew officer: President - PSE&G 80 PARK PLAZA, T4 NEWARK NJ 07102
Dirisio Derek M officer: President, PSEG Services Corp. PSEG 80 PARK PLAZA NEWARK NJ 07102

Public Service Enterprise Group Headlines

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