Calculate the value of share from the following information: Profit after tax of the company 290 crores Equity capital of company 1,300 crores Par…
CA Final · Advanced Financial Management · MTP · May 2025
Calculate the value of share from the following information: Profit after tax of the company 290 crores Equity capital of company 1,300 crores Par value of share 40 each Debt ratio of company (Debt/ Debt + Equity) 27% Long run growth rate of the company 8% Beta 0.1; risk free interest rate 8.7% Market returns 10.3% Capital expenditure per share 47 Depreciation per share 39 Change in Working capital 3.45 per share
Suggested Answer and Working Notes:
No. of Shares = 1,300 crores /40 = 32.5 Crores EPS = PAT / No. of shares = 290 crores / 32.5 crores = 8.923 FCFE = Net income – [(1-b) (capex – dep) + (1-b) (ΔWC)] FCFE = 8.923 – [(1-0.27) (47-39) + (1-0.27) (3.45)] = 8.923 - [5.84 + 2.5185] = 0.5645 Cost of Equity = R f + β (R m - R f ) = 8.7 + 0.1 (10.3 – 8.7) = 8.86% P o = FCFE(1+g) / (K e -g) = 0.5645(1.08) / (0.0886-.08) = 0.60966 / 0.0086 = 70.89
Topics: Security Valuation
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