Problem-1

Market Value of Equity

Debt Planned
Equity Remained

8000000
4700000
4700000

Rf(%)
Risk Premium (Rm-Rf)(%)
Beta(unlevered)
Present Cost of Capital(w/o
debt)

6
4
1.5
12

D/E Ratio
Beta (Levered)
Cost of Equity
Cost of Debt
WACC

1
2.4 Bl=Bu(1+(1-T)D/E)
15.6
16.58
12.774

Alternative - A
Terrible
Price
Units
Var Cost
Fixed Cost
Total Var Cost
Sales
Operational
Cost
EBIT
Interest
EBT
Tax
PAT
ROE(%)

Poor
0.2
94
80000
70.5
940000
5640000
7520000

0.5
94
100000
70.5
940000
7050000
9400000

470000
779260
-309260
-123704
-185556
-3.948

6580000
940000
779260
160740
64296
96444
2.052

7990000
1410000
779260
630740
252296
378444
8.052

5170000

Expected ROE
EPS
Price of Share

Normal

0.05
94
60000
70.5
940000
4230000
5640000

11.352
10.67088
68.40307692 Over Valued

Share Price will be Rs 94

Good
0.2
94
160000
70.5
940000
11280000
15040000

Excellent
0.05
94
200000
70.5
940000
14100000
18800000

12220000
15040000
2820000 3760000
779260
779260
2040740 2980740
816296 1192296
1224444 1788444
26.052
38.052

Alternative - B
Terrible
Poor
Normal
Good
0.05
0.2
0.5
0.2
94
94
94
94
60000
80000
100000
160000
47
47
47
47
2820000 2820000 2820000 2820000
2820000 3760000 4700000 7520000
5640000 7520000 9400000 15040000
5640000
0
779260
-779260
-311704
-467556
-9.948
Expected ROE
EPS
Price of Share

6580000 7520000 10340000

940000 1880000 4700000
779260
779260
779260
160740 1100740 3920740
64296
440296 1568296
96444
660444 2352444
2.052
14.052
50.052
20.652
19.41288
124.4415 Under Valued

Excellent
0.05
94
200000
47
2820000
9400000
18800000
12220000
6580000
779260
5800740
2320296
3480444
74.052

Problem -2

Debt Planned
Interest Rate(%)
Asset
Debt
Rf(%)
Risk Premium (Rm-Rf)(%)
Beta(unlevered)
Shares Repurchase
Remaining Shares
Equity
D/E Ratio
Beta (Levered)
Cost of Equity
Cost of Debt
WACC

10
10.95
9400000
940000
6
4
1.5
10000
90000
8460000
0.111111111
1.6
12.4
10.95
11.817

20
11.45
9400000
1880000

30
12.25
9400000
2820000

40
14.05
9400000
3760000

20000
30000
40000
80000
70000
60000
7520000 6580000 5640000
0.25 0.428571 0.666667
1.725 1.885714
2.1
12.9 13.54286
14.4
11.45
12.25
14.05
11.694
11.685
12.012

Alternative- A
Assets
Terrible
Poor
Normal
Good
Excellent

0.05
0.2
0.5
0.2
0.05

Units

9400000
9400000
9400000
9400000
9400000

60000
80000
100000
160000
200000

Sales
5640000
7520000
9400000
15040000
18800000

Var Costs
70.5
70.5
70.5
70.5
70.5

Alternative- B
Terrible
Poor
Normal
Good
Excellent

0.05
0.2
0.5
0.2
0.05

9400000
9400000
9400000
9400000
9400000

60000 5640000
80000 7520000
100000 9400000
160000 15040000
200000 18800000

47
47
47
47
47

50
16.58
9400000
4700000

60
20
9400000
5640000

50000
50000
4700000
1
2.4
15.6
16.58
12.774

60000
40000
3760000
1.5
2.85
17.4
20
14.16

TVC
4230000
5640000
7050000
11280000
14100000

2820000
3760000
4700000
7520000
9400000

TFC

Op Costs
940000
940000
940000
940000
940000

2820000
2820000
2820000
2820000
2820000

EBIT

5170000
6580000
7990000
12220000
15040000

5640000
6580000
7520000
10340000
12220000

470000
940000
1410000
2820000
3760000

Debt Planned-10
Interest
102930
102930
102930
102930
102930

0
940000
1880000
4700000
6580000

102930
102930
102930
102930
102930

Debt Planned-20 Debt Planned-30 Debt Planned-40 Debt Planned-50 Debt Planned-60
Interest
Interest
Interest
Interest
Interest
215260
345450
528280
779260
1128000
215260
345450
528280
779260
1128000
215260
345450
528280
779260
1128000
215260
345450
528280
779260
1128000
215260
345450
528280
779260
1128000

215260
215260
215260
215260
215260

345450
345450
345450
345450
345450

528280
528280
528280
528280
528280

779260
779260
779260
779260
779260

1128000
1128000
1128000
1128000
1128000

Debt Planned-10 Debt Planned-20

Debt Planned-30
Debt Planned-40
Debt Planned-50
Debt Planned-60 Debt Planned-10
EBT
EBT
EBT
EBT
EBT
EBT
EAT
367070
254740
124550
-58280 -309260
-658000
220242
837070
724740
594550
411720
160740
-188000
502242
1307070 1194740 1064550
881720
630740
282000
784242
2717070 2604740 2474550 2291720 2040740
1692000
1630242
3657070 3544740 3414550 3231720 2980740
2632000
2194242

-102930
837070
1777070
4597070
6477070

-215260
724740
1664740
4484740
6364740

-345450
594550
1534550
4354550
6234550

-528280
411720
1351720
4171720
6051720

-779260
160740
1100740
3920740
5800740

-1128000
-188000
752000
3572000
5452000

-61758
502242
1066242
2758242
3886242

Debt Planned-20 Debt Planned-30 Debt Planned-40 Debt Planned-50 Debt Planned-60
EAT
EAT
EAT
EAT
EAT
152844
74730
-34968
-185556
-394800
434844
356730
247032
96444
-112800
716844
638730
529032
378444
169200
1562844
1484730
1375032
1224444
1015200
2126844
2048730
1939032
1788444
1579200

-129156
434844
998844
2690844
3818844

-207270
356730
920730
2612730
3740730

-316968
247032
811032
2503032
3631032

-467556
96444
660444
2352444
3480444

-676800
-112800
451200
2143200
3271200

Expected EPS
10

50

60

10.8993 11.34043

11.4022 10.67088

8.1075

Expected EPS
10
20
30
15.2938 16.36305 17.58471

40
50
18.6872 19.41288

60
19.035

10.43713

20

30

40

Intrinsic Value for share assuming no

10

10

Intrinsic Value for share assuming no growth rate

20
30
40

20

30
129.8449

40

50

60

50

60