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Royal Caribbean Group WACC %

:11.68% (As of Today)
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As of today (2021-12-02), Royal Caribbean Group's weighted average cost of capital is 11.68%. Royal Caribbean Group's ROIC % is -11.37% (calculated using TTM income statement data). Royal Caribbean Group earns returns that do not match up to its cost of capital. It will destroy value as it grows.


Royal Caribbean Group WACC % Historical Data

The historical data trend for Royal Caribbean 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.

Royal Caribbean Group 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 6.78 7.84 11.24 9.43 12.62

Royal Caribbean Group Quarterly Data
Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21
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 11.24 12.62 14.04 13.40 13.21

Competitive Comparison

For the Travel Services subindustry, Royal Caribbean 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.

   

Royal Caribbean Group WACC % Distribution

For the Travel & Leisure industry and Consumer Cyclical sector, Royal Caribbean Group's WACC % distribution charts can be found below:

* The bar in red indicates where Royal Caribbean Group's WACC % falls into.



Royal Caribbean 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, Royal Caribbean Group's market capitalization (E) is $16375.343 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 Sep. 2021, Royal Caribbean Group's latest two-year average Short-Term Debt & Capital Lease Obligation was $2095.753 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $13768.7915 Mil. The total Book Value of Debt (D) is $15864.5445 Mil.
a) weight of equity = E / (E + D) = 16375.343 / (16375.343 + 15864.5445) = 0.5079
b) weight of debt = D / (E + D) = 15864.5445 / (16375.343 + 15864.5445) = 0.4921

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 1.52000000%. 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. Royal Caribbean Group's beta is 2.72.
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 = 1.52000000% + 2.72 * 6% = 17.84%

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, Royal Caribbean Group's interest expense (positive number) was $844.238 Mil. Its total Book Value of Debt (D) is $15864.5445 Mil.
Cost of Debt = 844.238 / 15864.5445 = 5.3215%.

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%.

Royal Caribbean 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)
=0.5079*17.84%+0.4921*5.3215%*(1 - 0%)
=11.68%

* 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.


Royal Caribbean Group  (NYSE:RCL) 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, Royal Caribbean Group's weighted average cost of capital is 11.68%. Royal Caribbean Group's ROIC % is -11.37% (calculated using TTM income statement data). Royal Caribbean 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

Royal Caribbean Group Business Description

Royal Caribbean Group logo
Industry
Consumer Cyclical » Travel & Leisure NAICS : 483111 SIC : 4489
Traded in Other Exchanges
Address
1050 Caribbean Way, Miami, FL, USA, 33132
Royal Caribbean is the world's second- largest cruise company, operating more than 60 ships across five global and partner brands in the cruise vacation industry. Brands the company operates include Royal Caribbean International, Celebrity Cruises, and Silversea. The company also has a 50% investment in a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises, allowing it to compete on the basis of innovation, quality of ships and service, variety of itineraries, choice of destinations, and price. The company is completed the divestiture of its Azamara brand in the first quarter of 2021.
Executives
Kulovaara Harri U officer: EVP, Maritime ROYAL CARIBBEAN CRUISE LINES 6100 BLUE LAGOON DRIVE, SUITE 200 MIAMI FL 33126
Pujol Henry L officer: SVP, Chief Accounting Officer ROYAL CARIBBEAN CRUISES LTD. 1050 CARIBBEAN WAY MIAMI FL 33132
Bayley Michael W officer: Pres& CEO,Royal Caribbean Intl ROYAL CARIBBEAN CRUISES LTD. 1050 CARIBBEAN WAY MIAMI FL 33132
Stein Bradley H officer: SVP, GC & ChiefComplianceOff 1050 CARIBBEAN WAY MIAMI FL 33132
Lutoff-perlo Lisa officer: Pres & CEO, Celebrity Cruises 1050 CARIBBEAN WAY MIAMI FL 33132
Liberty Jason T officer: EVP, Chief Financial Officer 1050 CARIBBEAN WAY MIAMI FL 33132
A Wilhelmsen A S 10 percent owner BEDDINGEN 8 AKER BRYGGE 1250 OSLO PO BOX 1583 VIKA N 0118 OSLO NORWAY Q8 00000
Wilhelmsen Arne Alexander director ANDERS WILHELMSEN & CO. AS BEDDINGEN 8, AKER BRYGGE OSLO Q8 NO-0118
Montiel Maritza Gomez director 475 W. TERRA COTTA AVE., SUITE E CRYSTAL LAKE IL 60014
Howe Stephen R. Jr. director C/O ROYAL CARIBBEAN CRUISES LTD. 1050 CARIBBEAN WAY MIAMI FL 33132
Sorensen Vagn O director ROYAL CARIBBEAN CRUISES LTD. 1050 CARIBBEAN WAY MIAMI FL 33132
Pritzker Thomas director PRITZKER & PRITZKER 200 W. MADISON STREET, 38TH FLOOR CHICAGO IL 60606
Ofer Eyal director CARLYLE M.G. LIMITED 18 UPPER BROOK STREET LONDON X0 W1Y 1PD
Moore Ann S director C/O AVON PRODUCS INC 1345 AVENUE OF THE AMERICAS NEW YORK NY 10105-0196
Brock John director 2500 WINDY RIDGE PARKWAY ATLANTA GA 30339

Royal Caribbean Group Headlines

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