Solution of Tata Motors Case Study

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%
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
46
49
52
55
-45
-32
-22
-16
NOPAT
1373
1853
2305
2692
319
351
386
424
Gross Cash flows
2688
3101
3448
3782
Capital expenditure
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

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%
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
46
49
52
55
-45
-32
-22
-16
NOPAT
1213
1546
1853
2117
319
351
386
424
Gross Cash flows
2528
2793
2997
3207
Capital expenditure
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

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
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
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
48484
6098 53332
6708 58666
7379
54582
60040
66045
19104
15920
21014
17512
23116
19263
3184
3502
3853
289
318
350
2012
2013
2014
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

Solution of Tata Motors Case Study

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Solution of Tata Motors Case Study

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cost of capital computation

increase in deferred tax liab

decrease in deferred tax asset

After tax non operating income

Gross Cash flows

Net cash flows

Cost of capital @12.5%

increase in deferred tax liab

decrease in deferred tax asset

After tax non operating income

Gross Cash flows

Net cash flows

Cost of capital @12.5%

increase in deferred tax liab

decrease in deferred tax asset

After tax non operating income

Gross Cash flows

Net cash flows

Cost of capital @12.5%

depreciation at 20% on WDV (Assumption)

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

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

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

if it decreases, my profits will increase to that extend

Additions 10% yoy

New Curr New Curr New Curr New Curr New

incr/ decr in net wc

Mostly Likely Scenario

incr/ decr in net wc

incr/ decr in net wc

Curr New Curr New Curr New

Optimistic Most likely Pessimistic

Market Value is MPS x No. Of equity shares

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