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  • Financial Management Project Group 7

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    Vivek Rana
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    This document presents the work of a group that calculated the weighted average cost of capital (WACC) for several consumer goods companies in India. It introduces the companies studied and provides a table showing the debt, equity, cost of equity calculated using CAPM, and WACC for each company. It then discusses the findings that companies with no debt have higher WACCs, capital structure impacts profitability, and the average WACC for the consumer goods industry is 10%, indicating higher risk and return requirements for investors.

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    This document presents the work of a group that calculated the weighted average cost of capital (WACC) for several consumer goods companies in India. It introduces the companies studied and provides a table showing the debt, equity, cost of equity calculated using CAPM, and WACC for each company. It then discusses the findings that companies with no debt have higher WACCs, capital structure impacts profitability, and the average WACC for the consumer goods industry is 10%, indicating higher risk and return requirements for investors.

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    38 visualizzazioni8 pagine

    Financial Management Project Group 7

    Caricato da

    Vivek Rana
    This document presents the work of a group that calculated the weighted average cost of capital (WACC) for several consumer goods companies in India. It introduces the companies studied and provides a table showing the debt, equity, cost of equity calculated using CAPM, and WACC for each company. It then discusses the findings that companies with no debt have higher WACCs, capital structure impacts profitability, and the average WACC for the consumer goods industry is 10%, indicating higher risk and return requirements for investors.

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    di 8

    FINANCIAL

    MANAGEMENT PROJECT

    By Group 7
    A B Samhitha (H001-19)
    Arna Bairagi (H005-19)
    Godi Sreemitra (H012-19)
    Khusboo Aggarwal (H019-19)
    Nidhi Minz (H028-19)
    Vagisha Alok (H064-19)
    Vivek Singh Rana (H067-19)
    Introduction

    Cost of capital calculation of


    firms
    CONTENT
    Average Cost of Capital

    Learnings
    Industry taken: Consumer
    Goods
    • Aditya Birla Fashion and Retail Ltd.

    • Asian Paints Ltd.


    INTRODUCTION • Bata India Ltd.

    • Berger Paints India Ltd.

    • Britannia Industries Ltd.

    • Hindustan Unilever Ltd.

    • V-Guard Industries Ltd.


    Equity
    Debt(Cr) share Cost/Return of
    Company [borrowin capital Equity(Re)
    Name g] (Cr) CAPM
    Aditya Birla
    Fashion and
    Retail Ltd. 723.78 773.48 0.043810222
    Asian Paints
    Ltd. 10.89 95.92 0.052935937
    Bata India
    Ltd. 0 0.1 0.054589121
    Berger
    Paints India
    Ltd. 0 97.11 0.054589121
    Britannia
    COST OF CAPITAL Industries
    CALCUL ATION OF Ltd. 0.26 24.03 0.054431569
    Hindustan
    FIRMS Unilever
    Ltd. 0 216 0.054589121
    V-Guard
    Industries
    Ltd. 0 42.6934 0.054589121
    Cost/Return of Equity(Re) CAPM

    0.04
    0.05

    0.05

    0.05
    FIRM WISE
    COST OF
    CAPITAL
    0.05

    0.05

    0.05

    Aditya Birla Fashion and Retail Ltd. Asian Paints Ltd.


    Bata India Ltd. Berger Paints India Ltd.
    Britannia Industries Ltd. Hindustan Unilever Ltd.
    V-Guard Industries Ltd.
    Average Cost
    Calculation of
    Of Capital
    Return on
    Debt is
    Return on calculated
    Beta levered
    Equity is by taking
    by un-
    calculated into
    levering and
    by CAPM considerati
    re-levering of
    model on only
    Beta
    Long term
    Debt
    Company Name (1-Tax) Calculated Re-Levered Beta Rd Rf We Wd WACC
    Aditya Birla Fashion and 0.258946 0.516596 0.483403 0.119017
    Retail Ltd. 0.77 0.442675022 089 0.0735 984 016 225
    2.755739 0.898043 0.101956 0.263882
    Asian Paints Ltd. 0.77 0.279783171 21 0.0735 254 746 736
    0.054589
    Bata India Ltd. 0.77 0.257290874 0 0.0735 1 0 121
    0.054589
    Berger Paints India Ltd. 0.77 0.257290874 0 0.0735 1 0 121
    5.923076 0.989296 0.010703 0.102667
    Britannia Industries Ltd. 0.77 0.259434429 923 0.0735 007 993 378
    0.054589
    Hindustan Unilever Ltd. 0.77 0.257290874 0 0.0735 1 0 121
    0.054589
    V-Guard Industries Ltd. 0.77 0.257290874 0 0.0735 1 0 121
    • Majority of the firms have not taken debt leading to
    Debt/Equity ratio being zero.
    • Comparing these firms with the firms which has taken the
    debt, the value of WACC of those firms are lower than
    that of the firms with debt.
    • According to the values generated in the given
    table above, the capital structure creates an
    impact on the profitability.
    • A high Wacc is a sign of higher risk associated with
    the firm’s operation. Thus most investors require
    LEARNINGS additional return to neutralize the risk.
    • The average Wacc for consumer goods industry is found
    to be 10%. Thus, investors need to be careful while
    investing for these industries as the risk on return is high.
    • Helped us gain a overview of the industry and application
    of various concepts : WACC calculation,CAPM model,Un-
    Levering and Re-levering of the Beta
    Thank You

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