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cost of capital computation

cost of equity
CAPM
ke = rf + beta(rm-rf)

0.1552

cost of debt
8.5% long term borrowings
12% debentures
15% other long term borrowings

15.52
2219
76
642

8.50%
12%
15%

2937
10.011 Tax 32%

cost of debt
WACC for computing cost of capital
equity
5537 0.65341
debt
2937 0.34659
8474

15.52
6.81

188.615
9.12
96.3

294.04
6.81
10.14093
2.359497

12.5

Sales
operating exps
dep

2006

2007
2008
Curr New Curr New

23568

28282
25453
896

1920
1728
100

32524
29271
737

3840
3456
160

37402
33662
610

1932
618

92
0

2515
805

224
0

3131
1002

Operating income
Taxes @ 32%
Total operating income

2009
2010
Curr New Curr New
5040 41891
4536 37702
148
528
356
0

3661
1172

6048
5443
138.4
466.4
0

1406

1934

2485

2956

increase in deferred tax liab

46

49

52

55

decrease in deferred tax asset

-45

-32

-22

-16

NOPAT

1405

1917

2455

2917

After tax non operating income

319

351

386

424

Gross Cash flows

2720

3165

3599

4007

Capital expenditure
Increase in financial investments
increase/ decrease in net wc

600
147
-785

500
162
359

200
178
355

300
196
321

Net cash flows


Continuing value

2758

2144

2866

3191

0.8889

0.7901

0.7023

0.6243

2452

1694

2013

1992

Cost of capital @12.5%


PV of FCFF

Value of Firm

2011
2012
Curr New Curr New
46918 6653 52548 7318
42226 5988 47293 6586
472 140.7
398 112.6
4220 524.6
1350
0

4857 619.2
1554
0

2013
2014
Curr New Curr New
58853 8050 65916
52968 7245 59324
358 150
327
5527
1769

655
0

8855
7970
140

6265
2005

3394

3922

4413

5006

58

62

66

70

-11

-8

-5

-4

3346

3868

4353

4940

467

514

565

621

4426

4892

5426

6028

400
215
329

100
237
367

500
260
411

300
286
459

3482

4188

4255

4982
54020

0.5549

0.4933

0.4385

0.3897

1932

2066

1866

1942
21054

37010

745
0

Sales
operating exps
dep

2006

2007
2008
Curr New Curr New

23568

28282
25453
896

1600
1440
100

32524
29271
737

3200
2880
160

36427
32784
610

1932
618

60
0

2515
805

160
0

3033
971

Operating income
Taxes @ 32%
Total operating income

2009
2010
Curr New Curr New
4200 40069
3780 36062
148
528
272
0

3479
1113

5040
4536
138.4
365.6
0

1374

1870

2334

2731

increase in deferred tax liab

46

49

52

55

decrease in deferred tax asset

-45

-32

-22

-16

NOPAT

1373

1853

2305

2692

After tax non operating income

319

351

386

424

Gross Cash flows

2688

3101

3448

3782

Capital expenditure
Increase in financial investments
increase/ decrease in net wc

600
147
-804

500
162
341

200
178
286

300
196
261

Net cash flows


Continuing value

2745

2098

2784

3025

0.8889

0.7901

0.7023

0.6243

2440

1658

1956

1889

Cost of capital @12.5%


PV of FCFF

Value of Firm

2011
2012
Curr New Curr New
44076 5544 48484 6098
39669 4990 43636 5488
472 140.7
398 112.6
3935 413.7
1259
0

4451 497.2
1424
0

2013
2014
Curr New Curr New
53332 6708 58666
47999 6037 52799
358 150
327
4975
1592

521
0

7379
6641
140

5540
1773

3090

3524

3904

4365

58

62

66

70

-11

-8

-5

-4

3042

3469

3843

4299

467

514

565

621

4122

4493

4917

5387

400
215
263

100
237
289

500
260
318

300
286
350

3244

3867

3838

4451
48253

0.5549

0.4933

0.4385

0.3897

1800

1908

1683

1735
18806

33873

598
0

Sales
operating exps
dep

2006

2007
2008
Curr New Curr New

23568

27103
24393
896

800
720
100

30356
27320
737

1600
1440
160

33391
30052
610

1814
580

-20
0

2298
736

0
0

2729
873

Operating income
Taxes @ 32%
Total operating income

2009
2010
Curr New Curr New
1750 36062
1575 32456
148
528
27
0

2013
1812
138.4

3078
985

62.9
0

1213

1563

1883

2156

increase in deferred tax liab

46

49

52

55

decrease in deferred tax asset

-45

-32

-22

-16

NOPAT

1213

1546

1853

2117

After tax non operating income

319

351

386

424

Gross Cash flows

2528

2793

2997

3207

Capital expenditure
Increase in financial investments
increase/ decrease in net wc

600
147
-919

500
162
236

200
178
186

300
196
171

Net cash flows


Continuing value

2700

1895

2433

2540

0.8889

0.7901

0.7023

0.6243

2400

1498

1709

1586

Cost of capital @12.5%


PV of FCFF

Value of Firm

2011
2012
Curr New Curr New
38226 2214 40520 2435
34404 1993 36468 2192
472 140.7
398 112.6
3350 80.68
1072
0

3654 130.9
1169
0

2013
2014
Curr New Curr New
42951 2679 45528
38656 2411 40975
358 150
327
3937
1260

118
0

2947
2652
140

4226
1352

2359

2616

2795

3028

58

62

66

70

-11

-8

-5

-4

2311

2561

2735

2963

467

514

565

621

3391

3585

3808

4051

400
215
138

100
237
147

500
260
156

300
286
166

2638

3102

2891

3298
35760

0.5549

0.4933

0.4385

0.3897

1464

1530

1268

1285
13937

26677

155
0

depreciation at 20% on WDV (Assumption)

2007
Curr New

2008
Curr New

2009
Curr
New

2010
Curr
New

2011
Curr

op balance
Additions
total
dep @20%

4382
100
4482
896

500
500
100

3586
100
3686
737

400
400
800
160

2948
100
3048
610

640
100
740
148

2439
200
2639
528

592
100
692
138

2111
250
2361
472

cl bal

3586

400

2948

640

2439

592

2111

554

1889

2011
New

2012
Curr New

2013
2014
Curr New Curr New

554
150
704
141

1889
100
1989
398

563
0
563
113

1591
200
1791
358

450
300
750
150

1433
200
1633
327

600
100
700
140

563

1591

450

1433

600

1306

560

deferred tax liability increase by 6% on y-o-y basis


deferred tax liability

2006

2007

2008

2009

2010

2011

2012

771

817

866

918

973

1032

1094

46

49

52

55

58

62

Increase amount

deferred tax assets decrease by 30% on y-o-y basis


deferred tax assets
Increase amount

2006

2007

2008

2009

2010

2011

2012

151

106

74

52

36

25

18

-45

-32

-22

-16

-11

-8

tax liability means amount that is pending to be paid to the income tax authorities therefore if it further increases, my profits

tax asset means the company has some amount deposited with income tax authorities and if it decreases, my profits will incr

2013

2014

1159

1229

66

70

2013

2014

12

-5

-4

e if it further increases, my profits will decrease to that extend

if it decreases, my profits will increase to that extend

2006
non operating income
less taxes @32%
non opeating income after taxes
10% growth in non operating income
total after tax non operating income

609
195
414

2007

2008

2009

2010

2011

290
29

319
32

351
35

386
39

424
42

319

351

386

424

467

2012

2013

2014

467
47

514
51

565
56

514

565

621

2007

2008

2009

2010

2011

2012

2013

OP bal

1470

1617

1779

1957

2152

2367

2604

Additions 10% yoy

147

162

178

196

215

237

260

Cl balance

1617

1779

1957

2152

2367

2604

2865

2014
2865

286
3151

Optimistic Scenario

2006

2007

Curr

2008

2009

2010

2011

New Curr New Curr New Curr New Curr New

Revenues

23568 28281.6

Total Revenues

23568

30202

36364

42442

47939

53571

Current assets
Current liabilites

9665
7118

10571
8809

12727
10606

14855
12379

16779
13982

18750
15625

net wc

2547

1762

2121

2476

2796

3125

-785

359

355

321

329

incr/ decr in net wc

1920 32524

3840 37402

5040 41891

6048 46918

6653

Mostly Likely Scenario

2006

2007
2008
2009
2010
2011
Curr New Curr New Curr New Curr New Curr New

Revenues

23568 28281.6

Total Revenues

23568

29882

35724

40627

45109

49620

Current assets
Current liabilites

9665
7118

10459
8715

12503
10419

14219
11849

15788
13157

17367
14473

net wc

2547

1743

2084

2370

2631

2895

-804

341

286

261

263

incr/ decr in net wc

1600 32524

3200 36427

4200 40069

5040 44076

5544

Pessimistic Scenario

2006

2007
2008
2009
2010
2011
Curr New Curr New Curr New Curr New Curr New

Revenues

23568 27103.2

Total Revenues

23568

27903

31956

35141

38075

40440

Current assets
Current liabilites

9665
7118

9766
8138

11184
9320

12299
10249

13326
11105

14154
11795

net wc

2547

1628

1864

2050

2221

2359

-919

236

186

171

138

incr/ decr in net wc

800 30356

1600 33391

1750 36062

2013 38226

2214

2012

2013

2014

Curr New Curr New Curr New


52548

7318 58853

8050 65916

8855

59866

66903

74771

20953
17461

23416
19513

26170
21808

3492

3903

4362

367

411

459

2012
2013
2014
Curr New Curr New Curr New
48484

6098 53332

6708 58666

7379

54582

60040

66045

19104
15920

21014
17512

23116
19263

3184

3502

3853

289

318

350

2012
2013
2014
Curr New Curr New Curr New
40520

2435 42951

2679 45528

2947

42955

45630

48475

15034
12528

15970
13309

16966
14139

2506

2662

2828

147

156

166

Optimistic Most likely Pessimistic


Probabilities
Value of Firm

30%
37010

40%
33873

30%
26677

11103

13549

8003

32655
545

33200
31000-33000 cr

Value of Firm
Marketable Securities
Estimated Value of Firm

Market Value is MPS x No. Of equity shares