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Company Overview of Itc
Company Overview of Itc
ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West Bengal. Its
diversified business includes five segments:
Established in 1910 as the Imperial Tobacco Company of India Limited, the company was
renamed as the Indian Tobacco Company Limited in 1970 and further to I.T.C. Limited in
1974. The periods in the name were removed in September 2001 for the company to be
renamed as ITC Ltd. The company completed 100 years in 2010 and as of 2012-13, had an
annual turnover of US$8.31 billion and a market capitalisation of US$45 billion. It employs
over 25,000 people at more than 60 locations across India and is part of Forbes 2000 list.
The general idea behind CAPM is that investors need to be compensated in two
ways: time value of money and risk. The time value of money is represented by
the risk-free (rf) rate in the formula and compensates the investors for placing
money in any investment over a period of time. The other half of the formula
represents risk and calculates the amount of compensation the investor needs
for taking on additional risk. This is calculated by taking a risk measure (beta)
that compares the returns of the asset to the market over a period of time and to
the market premium (Rm-rf).
rf = risk free rate 8.82% taken from investing.com website over a 5 year
period(2010-2014)
Beta of security = Using Capitaline and Reuters past 5 years adjusted stock
value, 0.48
And Rm which is market capital return, = 13.69% S&P 500 Index
Ra= Rf + B (Rm-Rf)
Total cost of equity = 11.1524%
The CAPM model is valid within a special set of assumptions. They are (Bodie,
Kane, and Marcu, 2005)5 :
All the investors are risk averse; they will maximize the expected utility at
the end of period wealth.
That is referred to as homogenous expectations (beliefs) about asset returns.
All the investors use the same information at the same time on expected
return and covariance matrix of stock return to form the optimal risky
portfolio.
A fixed risk-free rate exists, and allows the investors to borrow or lend
unlimited amounts to the same interest rate.
There are a definite number of stocks and their quantities are fixed within the
one period world.
All stocks are perfectly divisible and priced in a perfectly competitive market.
There are no market imperfections (there are no taxes, regulations, or trading
costs). These assumptions are all hard to fulfill in reality, but as a financial
theory, it may still describe reality in a reasonably way.
Working Capital
Comment on relative efficiency of working capital management.
How has the companys WCM fared with respect to benchmark?
What are the challenges in the existing position of working capital for
the company and how has it impacted the company profitability?
What improvements in WCM can bring about positive financial impact?
Calculate/estimate the positive change resulting from your suggestions.