Table of Con ITEM 7. MD&A PART II Capital expenditures Critical accounting policies and estimates #WORTHREACHINGFOR I Constellation Brands, Inc. FY 2021 Form 10-K Our significant accounting policies are more fully described in Note 1. Certain policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by management to determine appropriate assumptions to be used in certain estimates; as a result, they are subject to an inherent degree of uncertainty. Estimates are based on historical experience, observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. We review estimates to ensure that they appropriately reflect changes in our business on an ongoing basis. Our critical accounting estimates include: Equity securities, Warrants – estimated using the Black-Scholes option-pricing model (Level 2 fair value measurement) and Monte Carlo simulations (Level 2 fair value measurement). These valuation models use various market-based inputs, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield, as applicable. Management applies significant judgment in its determination of expected volatility. We consider both historical and implied volatility levels of the underlying equity security and apply limited consideration of historical peer group volatility levels. Debt securities, Convertible – estimated using a binomial lattice option-pricing model (Level 2 fair value measurement), which includes an estimate of the credit spread based on market spreads using bond data as of the valuation date. This valuation model uses various market-based inputs, In fiscal 2017, we began construction of the Mexicali Brewery. In March 2020, a public consultation was held on the construction of our Mexicali Brewery. Following the negative result of the public consultation, we are in discussions with government officials in Mexico regarding next steps for our brewery construction project and options elsewhere in the country. We intend to continue working with government officials to mutually agree upon a path forward. At this time, we have suspended all Mexicali Brewery construction activities. See Note 23 for further discussion. We plan to spend from $1.0 billion to $1.1 billion for capital expenditures in Fiscal 2022, including approximately $900 million for the Beer segment associated primarily with the Mexico Beer Projects. The remaining planned Fiscal 2022 capital expenditures consist of improvements to existing operating facilities and replacements of existing equipment and/or buildings. The Mexico Beer Projects are expected to be completed by Fiscal 2025. Accordingly, we expect to spend approximately $700 million to $900 million annually in Fiscal 2023 through Fiscal 2025 for the Beer segment. Management reviews the capital expenditure program periodically and modifies it as required to meet current business needs. During Fiscal 2021, we incurred $864.6 million for capital expenditures, including $693.9 million for the Beer segment primarily for the Mexico Beer Projects. Canopy investment • Fair value of financial instruments.  Management’s estimate of fair value requires significant judgment and is subject to a high degree of variability based upon market conditions and the availability of specific information. The fair values of our financial instruments that require the application of significant judgment by management are as follows: