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  • CFEV Practice 19

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    Shashwat Jha
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    This document contains calculations related to weighted average cost of capital (WACC), cost of equity using the capital asset pricing model (CAPM) and dividend growth model (DGM), and an example buyback calculation. It provides the sources of capital and values for a company. It also includes industry debt to equity ratios, yield curves, and the Nifty 50 expected return. Sample calculations are shown for earnings per share (EPS), price to earnings (P/E) ratio, and new share price after a buyback.

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    This document contains calculations related to weighted average cost of capital (WACC), cost of equity using the capital asset pricing model (CAPM) and dividend growth model (DGM), and an example buyback calculation. It provides the sources of capital and values for a company. It also includes industry debt to equity ratios, yield curves, and the Nifty 50 expected return. Sample calculations are shown for earnings per share (EPS), price to earnings (P/E) ratio, and new share price after a buyback.

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    8 views3 pages

    CFEV Practice 19

    Uploaded by

    Shashwat Jha
    This document contains calculations related to weighted average cost of capital (WACC), cost of equity using the capital asset pricing model (CAPM) and dividend growth model (DGM), and an example buyback calculation. It provides the sources of capital and values for a company. It also includes industry debt to equity ratios, yield curves, and the Nifty 50 expected return. Sample calculations are shown for earnings per share (EPS), price to earnings (P/E) ratio, and new share price after a buyback.

    Copyright:

    © All Rights Reserved
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    of 3

    Q1 COE 12%

    COPS 10.00% D/D+E 0.1818182


    COLD 8% Kd 8%
    COSD 5% (1-Tax) 70%
    Marginal Tax 35%
    Effective Tax 30% WACC 10.56%

    Source Of capital Book Value Market Value


    Equity ₹ 500,000.00 ₹ 750,000.00
    LTD ₹ 225,000.00 ₹ 200,000.00
    STD ₹ 100,000.00 ₹ 100,000.00
    Preffered Stock ₹ 100,000.00 ₹ 150,000.00
    ₹ 925,000.00 ₹ 1,200,000.00

    Q2 Ke (CAPM) Rf+Beta *Rf 12.5%


    DGM Div/R-g =P R= Div/P + g 13.3%

    Q3 D/E (Company) 0.75 D/D+E 0.429


    Kd (before Tax) 9% Kd(1-T) 6.30%
    Tax 30% Ke 13.60%
    Equity Beta 1.2
    D/E (Industry) 0.6 WACC
    YTM 3yr 6.15%
    YTM 10yr 6.50%
    Nifty 50 Expected Return 12%
    a.
    Q4. EPS ₹ 20.00
    E/D+E Share Price ₹ 400.00
    To be Divided ₹ 400,000.00
    No of Shares 8000

    In case of buyback Earnings ₹ 160,000.00


    EPS ₹ 22.86

    b.
    P/E 20
    Mkt Equity ₹ 3,200,000.00
    New Share Price P/E*EPS ₹ 457.14

    Bu 0.845
    Bl 1.289
    Spend Per ₹ 50.00

    Price ₹ 57.14

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