Ongc and Jsw and Shree

Topics: Weighted average cost of capital, Cost of capital, Capital structure Pages: 5 (493 words) Published: March 8, 2012
ONGC

Ke – cost of equity

|Rm – expected returns on emerging markets |13 | |Rf – risk free return |8.5 % | |Beta |0.2835 | |Ke = Rf + beta( Rm-Rf) |12.18 % |

Market value of equity

|Issued, subscribed and paid up equity shares (i) Rs 5 Face value |8554000000 | |Current Market Price |281.6 | |Market Value of Equity |(i)*(ii) = Rs. 240880.64 crores |

Being debt structure absent in Nalco the cost of debt is zero, Therefore WACC ( Weighted Average Cost of Capital)

|WACC |KePe + KdPd + KpPp | |WACC by (ONGC) |12.18 % |

Peer comparison

JSW Steel ltd

Ke – cost of equity

|Rm – expected returns on emerging markets |13% | |Rf – risk free return |8.5 % | |Beta |0.5525 | |Ke = Rf + beta( Rm-Rf) |15.68 % |

Market value of equity

|Issued, subscribed and paid up equity shares (i) Re 1 Face value |563180000 | |Current Market Price |710.25 | |Market Value of Equity |(i)*(ii) = Rs. 39999.8545 crores |

Book Value of Debt –

Kd – cost of Debt –

a) Corporate tax calculations (in crores)

|PBT (i) |2441 | |Tax expenses (ii) |384 | |Tax rate (t) |15.73 % |

b) Pre tax cost of Debt (in crores)

|Interest expense |1056 | |Avg loan |7675 | |Interest rate |13.76 % |

c) Cost of Debt –

|Kd |Interest rate * (1-t) | |Kd |11.59 % |

Notes =

1. Market value of the debt is taken as the book value of debt.

2. Debt...
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