Capital And

Investment Decisions
presentation on

COST OF
CAPITAL OF
OMAXE LIMITED

COST OF EQUITY
SHARE CAPITAL

In mio

Equity share capital = Rs. 1,735.67

Cost of equity share capital, Ke =
EPS or DPS
MPS
Earning per share, DPS = Rs. 0.70
Market value per share, MPS = Rs.
148.80

COST OF EQUITY
SHARE CAPITAL
Cost of equity share capital, K e= DPS
MPS
=

0.70
X 100
148.80
= 0.47 %

COST Of RETAINED
EARNINGS

In mio

Retained earnings = Rs.

8914.72
Cost of equity share capital, Kr =
EPS
MPS
Earning per share, EPS = Rs.
4.95

EPS
Profit after tax, PAT = Rs. 858.47
No. of equity shares = 173,567,000
Earning per share, EPS =
PAT
No. of equity
shares
= 858.47 X
1,000,000
173,567,000
= Rs. 4.95

COST Of RETAINED
EARNINGS
Cost of retained earnings, Kr = EPS
MPS
=

4.95 X 100
148.80
= 3.34 %

COST Of DEBT
In mio

Long term debts, (net proceeds)

NP = Rs. 5,355.95
Interest cost, I = Rs. 1,580.19
Tax = 35 % ; t = 0.35
Cost of debt = I X (1 t )
NP

COST Of DEBT
Cost of debt = I X (1 t )
NP
= 1580.19 X
( 1 0.35)
5355.95
= 25.08 %

AVERAGE COST OF
CAPITAL

Cost of equity share capital, Ke = 3.34%

Cost of retained earnings, Kr = 3.34%
Cost of debt, Kd = 43.73%
Average cost of capital, CoC = Ke + Kr + Kd
3
= 16.80%

WEIGHTED AVERAGE
COST OF CAPITAL
Source of
fund
Equity
share
capital
Retained
earnings
Debt
Total

Amount weightag
(Rs.)
e
1735.67
10.84

CoC
0.005

0.05

8914.72

55.69

0.033

1.86

5355.95

33.46

0.251

8.39

16006.34

100

10.30

RETURN ON
INVESTMENT

In mio

Return on investment, RoI =

profit after interest
and tax
capital
employed
Profit after tax, PAT = Rs. 858.47
Capital employed = Rs. 21,274.48

CAPITAL EMPLOYED
In mio

Shareholders funds
Long term liabilities
Total liabilities
Less: Investment outside
business

15,787.
75
4,620.6
0
20408.3
5
105.76

RETURN ON
INVESTMENT

In mio

Return on investment, RoI =

profit after interest
and tax
capital
employed
= 858.47 x 100
20302.59
= 4.24 %

 Cost of capital,
CoC = 10.30 %
Return on investment,
RoI = 4.24 %
CoC > RoI

ThAnK
YoU