Wockhardt

Capital Asset Pricing Model

Book Book Value Market Market
Sources Values (in (%) Value (in Value (%)
Rs. Crores) Weightage Rs. Crores) weightage
Equity 354 12 52114 95
9% Pref Shares 1000 33 1000 2
6% Long Term
Loan 1654 55 1654 3
3008 100 54768 100

Market
Post Tax
Sources Value (%) Pre Tax WACC (%)
Cost (%)
weightage cost (%)
Equity 81 --- 22.28 18
9% Pref Shares 16 --- 0.009 0.144
6% Long Term
Loan 3 6 4.5 13.5
100 31.64

Current Market Price of Share is Rs 734/- per Share

Value = 1.76 Rf = 6.8 (Rm - Rf) = 8.8
Cost of Equity Re = Rf + (Rm -
Rf) Long term Loan i=6% (Pre Tax)
Re = 6.8 + 1.76 (8.8) = 22.28 Post Tax = 0.06 (1-0.35) = 4.5
Cost of Pref Shares = 9/1000 =
0.009 WACC = 31.64%

Dividend Discount Model

K = (D1/P0) + Dividend Yield
g =0 g=bxr
b = % Retained Cost of Equity = K =
Earning = 100% r= ROSE = 8.5% 8.5%
 Fortis
Capital Asset Pricing Model
Book Values Book Value Market Value Market Value
Sources (in Rs. (%) (in Rs. (%)
Crores) Weightage Crores) weightage
Equity 463 40 9121 93
14% Pref
Shares 78 7 78 1
10% Long
Term Loan 615 53 615 6
1156 100 9814 100

Market Value
Post Tax Cost
Sources (%) Pre Tax cost WACC (%)
(%)
weightage (%)
Equity 92 --- 14.72 13.5
14% Pref
Shares 1 --- 18 0.18
10% Long
Term Loan 7 10 6.5 0.456
100 14.18

Current Market Price of Share is Rs ____/- per Share

Value = 0.9 Rf = 6.8 (Rm - Rf) = 8.8
Cost of Equity Re = Rf + (Rm - Rf) Long term Loan i=7.5% (Pre Tax)
Re = 6.8 + 0.9 (8.8) = 14.72 Post Tax = 0.1 (1-0.35) = 6.5%
Cost of Pref Shares = 14/78 = 18 WACC = 14.18%

Dividend Discount Model

K = (D1/P0) +
g
Dividend Yield =0 g=bxr
b = % Retained
Earning = -100% r= ROSE = loss = (2%) Cost of Equity = K = -2%