Louis Vuitton

SUBMITTED TO:

Submitted by:
00/00/2021
Table of Contents
Introduction.........................................................................................................................................2
Beta.......................................................................................................................................................2
Price of CAC 40 index:........................................................................................................................4
Cost of common equity........................................................................................................................6
Dividend discount model.....................................................................................................................7
WACC..................................................................................................................................................8
Capital structure:................................................................................................................................8
MNCS Cost of capital..........................................................................................................................9
Reference:.............................................................................................................................................9

Introduction
Moet Hennessey louis Vuitton (LMVH) or commonly known as louis Vuitton it is French
luxury conglomerate specializing in luxury goods headquarter in Paris France. This

1
organization was formed as merger of style house louis Vuitton with Moet Hennessey.
company is listed in Euronext Paris exchange and is constitute of CAC 40 index. LMVH
controls 60 subsidiaries. these subsidiaries are independently managed under umbrella of 6
branches fashion accessories, watches, jewelry, perfumes, wine and spirit, cosmetics, elective
distribution, and other activities. Christian Dior as the main holding company of LMVH
owing 40.9% shares 59.01 voting right. Bern auld Arnoult is CEO and chairman of both
companies he purchased all shares of Christian Dior company 13.1 billion buyout. At the end
of 2017, only declared major shareholder in LMVH was Arnoult family group. On May
2018 LMVH puts its resources into online fashion business LYST as worlds famous brand to
expand their presence online and capture youthful shopper. LMVH injected 60 million into
LYST. LMVH is leading as 60 million investment means 45% of total.
The reason of choosing louis Vuitton is that it is multination corporation public listed
company, due to diversification into well-known brands and standard products therefore it
has continue growth, it is globally connected and it maintain balance between tradition and
innovation, its handmade quality in fashion industry makes it unique. The brand hires best
talent to work on their goods which give them distinctive and style.

Beta
Beta measures systematic risk of company, that risk which can not be diversifiable. Here, we
measure beta through many ways, by using slope formula, covariance, and regression
analysis. In beta analysis, market return and company return are required which we found
from investing.com. the process of beta finding is to first calculate company return from
monthly stock prices of last five years and used CAC 40 index as proxy of market index.
Unlevered beta of company is 0.95.
Price index of Louis Vuitton

Date Price Open High Low Vol. Change %

20-Dec 510.9 487 517.2 484.4 8.58M 5.80%
20-Nov 482.9 402.3 499.5 399.45 12.51M 20.03%
20-Oct 402.3 404.2 440.3 396.3 9.72M 0.73%
20-Sep 399.4 395.1 427.9 390.7 11.11M 1.68%
20-Aug 392.8 366.45 404.55 364.5 7.21M 7.10%
20-Jul 366.75 391.35 418.3 365.95 11.01M -6.08%
20-Jun 390.5 383.35 405.2 363.75 16.25M 4.13%
20-May 375 345 387.3 324.3 12.07M 6.40%
20-Apr 352.45 328 364.3 316.1 13.38M 4.14%
20-Mar 338.45 385 388.8 278.7 35.22M -8.74%
20-Feb 370.85 394.65 424.7 353.15 16.58M -6.19%
20-Jan 395.3 418 439.05 394.1 12.23M -4.56%
19-Dec 414.2 408 419.5 386.6 9.95M 1.69%
19-Nov 407.3 384.5 411.05 384.2 9.05M 6.48%
19-Oct 382.5 366.8 389.6 344 12.08M 4.90%
19-Sep 364.65 362.25 384.2 353.65 11.32M 0.62%
19-Aug 362.4 373 379.3 341 15.07M -3.44%
19-Jul 375.3 380.15 392.65 371.1 11.86M 0.27%

2
19-Jun 374.3 335.3 375.25 330.4 13.11M 10.54%
19-May 338.6 349.45 355.05 323.05 13.51M -2.99%
19-Apr 349.05 332.5 354.35 327.15 12.24M 6.45%
19-Mar 327.9 305 330.4 285.7 13.10M 8.58%
19-Feb 302 282.5 305 280.3 12.52M 7.95%
19-Jan 279.75 254.05 280 243.65 16.02M 8.35%
18-Dec 258.2 260.5 269.05 242.3 14.58M 2.24%
18-Nov 252.55 268.8 280.7 249.75 15.15M -6.05%
18-Oct 268.8 304.55 307.95 256.15 20.45M -11.75%
18-Sep 304.6 299.5 310.25 278.6 13.41M 0.91%
18-Aug 301.85 299 312.6 290 10.28M 1.00%
18-Jul 298.85 283.05 310.2 281 11.93M 4.79%
18-Jun 285.2 300.55 311.5 278.6 14.62M -3.99%
18-May 297.05 290.15 313.7 289.1 12.71M 2.68%
18-Apr 289.3 249.05 289.3 248.7 14.00M 15.63%
18-Mar 250.2 246 253.65 237.55 12.76M 1.50%
18-Feb 246.5 253.8 253.95 232.5 15.26M -2.41%
18-Jan 252.6 245.65 254.6 238 13.68M 2.93%
17-Dec 245.4 245 254.7 242.05 10.91M 0.37%
17-Nov 244.5 256.65 260.55 243.35 13.25M -4.53%
17-Oct 256.1 233.55 256.95 229.7 11.77M 9.70%
17-Sep 233.45 221.95 233.45 215.8 11.20M 5.99%
17-Aug 220.25 214.5 223.75 212.9 12.27M 3.55%
17-Jul 212.7 219.5 224.85 211.9 16.27M -2.57%
17-Jun 218.3 227.5 235.1 217.9 13.96M -3.90%
17-May 227.15 227 239.65 224.85 13.64M 0.29%
17-Apr 226.5 205.95 227.65 202.85 14.06M 10.03%
17-Mar 205.85 191.35 205.85 191.35 12.55M 8.66%
17-Feb 189.45 188.8 193.7 181.95 10.84M 1.53%
17-Jan 186.6 181.35 193.35 175.8 15.83M 2.87%
16-Dec 181.4 170.95 181.4 168 14.37M 5.65%
16-Nov 171.7 166.65 172.5 159.9 15.05M 3.71%
16-Oct 165.55 151.45 169.35 151 15.02M 9.06%
16-Sep 151.8 151.95 157.2 145.75 14.45M 0.07%
16-Aug 151.7 153.95 159.3 148.2 12.80M -1.11%
16-Jul 153.4 136.4 155.45 130.7 19.25M 12.79%
16-Jun 136 143.85 149.8 130.55 22.67M -5.59%
16-May 144.05 146.3 150.6 141.05 15.04M -0.72%
16-Apr 145.1 148.1 155.2 140.45 18.95M -3.59%
16-Mar 150.5 153.8 163.45 146.2 17.88M -2.15%
16-Feb 153.8 148.5 157.55 142.4 24.80M 3.78%
16-Jan 148.2 142.75 148.2 130.75 23.81M 2.28%

3
Price of CAC 40 index:
change % cac
Date price open high low volume 40 index
20-Dec 5,551.41 5,542.46 5,625.60 5,306.58 1.76B 0.60%
20-Nov 5,518.55 4,614.95 5,612.76 4,581.86 2.44B 20.12%
20-Oct 4,594.24 4,850.20 4,998.51 4,512.57 1.98B -4.36%
20-Sep 4,803.44 4,974.42 5,131.39 4,666.26 2.11B -2.91%
20-Aug 4,947.22 4,797.06 5,096.53 4,763.60 1.49B 3.42%
20-Jul 4,783.69 4,939.80 5,172.98 4,783.69 1.97B -3.09%
20-Jun 4,935.99 4,776.72 5,213.67 4,691.81 2.77B 5.12%
20-May 4,695.44 4,413.14 4,784.09 4,194.58 2.19B 2.70%
20-Apr 4,572.18 4,259.94 4,719.74 4,142.28 2.25B 4.00%
20-Mar 4,396.12 5,416.02 5,509.28 3,632.06 4.76B -17.21%
20-Feb 5,309.90 5,822.04 6,111.41 5,229.56 2.25B -8.55%
20-Jan 5,806.34 6,016.61 6,109.81 5,799.04 1.64B -2.87%
19-Dec 5,978.06 5,910.12 6,065.00 5,697.06 1.46B 1.23%
19-Nov 5,905.17 5,749.48 5,966.79 5,739.70 1.58B 3.06%
19-Oct 5,729.86 5,696.20 5,778.24 5,393.49 1.89B 0.92%
19-Sep 5,677.79 5,483.43 5,696.25 5,441.18 1.73B 3.60%
19-Aug 5,480.48 5,500.91 5,563.65 5,170.77 1.78B -0.70%
19-Jul 5,518.90 5,584.13 5,672.77 5,496.77 1.58B -0.36%
19-Jun 5,538.97 5,171.61 5,582.24 5,152.30 1.73B 6.36%
19-May 5,207.63 5,568.20 5,573.16 5,160.91 1.95B -6.78%
19-Apr 5,586.41 5,394.50 5,601.38 5,376.18 1.60B 4.41%
19-Mar 5,350.53 5,267.14 5,443.10 5,211.76 1.81B 2.10%
19-Feb 5,240.53 5,004.65 5,248.50 4,946.14 1.74B 4.96%
19-Jan 4,992.72 4,642.18 5,016.28 4,606.20 1.81B 5.54%
18-Dec 4,730.69 5,112.58 5,115.13 4,555.99 1.85B -5.46%
18-Nov 5,003.92 5,076.55 5,168.11 4,894.30 1.91B -1.76%
18-Oct 5,093.44 5,494.93 5,519.94 4,896.80 2.33B -7.28%
18-Sep 5,493.49 5,400.70 5,546.80 5,226.31 1.79B 1.60%
18-Aug 5,406.85 5,520.33 5,539.41 5,287.18 1.58B -1.90%
18-Jul 5,511.30 5,264.40 5,529.03 5,242.64 1.79B 3.53%
18-Jun 5,323.53 5,440.42 5,560.62 5,246.41 1.94B -1.39%
18-May 5,398.40 5,511.46 5,657.44 5,381.38 1.90B -2.21%
18-Apr 5,520.50 5,144.63 5,521.44 5,094.69 1.59B 6.84%
18-Mar 5,167.30 5,304.81 5,315.77 5,038.12 2.00B -2.88%
18-Feb 5,320.49 5,510.59 5,529.40 5,051.21 1.97B -2.94%
18-Jan 5,481.93 5,318.74 5,567.03 5,258.66 1.76B 3.19%
17-Dec 5,312.56 5,374.13 5,429.03 5,299.06 1.49B -1.12%
17-Nov 5,372.79 5,524.38 5,536.40 5,267.22 1.80B -2.37%

4
 17-Oct 5,503.29 5,332.92 5,513.53 5,326.66 1.63B 3.25%
17-Sep 5,329.81 5,117.19 5,329.81 5,050.09 1.89B 4.80%
17-Aug 5,085.59 5,116.90 5,231.65 4,995.07 1.60B -0.16%
17-Jul 5,093.77 5,151.19 5,259.47 5,092.14 1.69B -0.53%
17-Jun 5,120.68 5,290.84 5,372.97 5,117.23 2.02B -3.08%
17-May 5,283.63 5,284.88 5,442.10 5,238.51 2.36B 0.31%
17-Apr 5,267.33 5,130.18 5,296.52 4,980.41 2.10B 2.83%
17-Mar 5,122.51 4,897.48 5,122.51 4,897.48 2.26B 5.43%
17-Feb 4,858.58 4,786.85 4,932.35 4,733.82 1.97B 2.31%
17-Jan 4,748.90 4,845.96 4,929.60 4,748.90 1.98B -2.33%
16-Dec 4,862.31 4,571.20 4,864.29 4,490.15 2.12B 6.20%
16-Nov 4,578.34 4,532.34 4,606.66 4,344.88 2.43B 1.53%
16-Oct 4,509.26 4,447.54 4,579.28 4,370.65 2.01B 1.37%
16-Sep 4,448.26 4,448.03 4,569.62 4,310.88 2.19B 0.23%
16-Aug 4,438.22 4,469.99 4,528.00 4,293.34 1.76B -0.04%
16-Jul 4,439.81 4,261.09 4,474.67 4,062.07 2.14B 4.77%
16-Jun 4,237.48 4,502.84 4,507.22 3,955.98 3.11B -5.95%
16-May 4,505.62 4,455.76 4,536.63 4,245.17 2.14B 1.73%
16-Apr 4,428.96 4,331.28 4,607.69 4,229.12 2.45B 1.00%
16-Mar 4,385.06 4,343.93 4,580.97 4,323.18 2.70B 0.72%
16-Feb 4,353.55 4,418.14 4,422.61 3,892.46 3.02B -1.44%
16-Jan 4,417.02 4,582.05 4,586.11 4,084.68 2.76B -4.75%

BETA
f(x) = 0.95 x + 0.02 GRAPH

Linear ()
Linear ()

-20 -15 -10 -5 0 5 10 15 20 25

-

-
Risk free rate
Risk free rate is used to find cost of equity. Risk free rate is calculated by using current rate
of long term 10year treasury rate is 2.25% which we get from mentioned source. I am used
as benchmark to calculate the return of corporation. If we assume the systematic risk of
market is zero, then investors return will be equal to risk free rate, but this Is not possible in
real scenario that systematic risk Is not complete diversified.
Country equity risk premium
Country risk premium is used to find cost of equity, here we used country risk premium
instead of market risk premium due to many subsidiaries in different companies. From given
source we found country equity risk premium of France country is 5.20%. this premium
shows about excess return over risk free rate.

Cost of common equity

This is minimum required rate of return for investors to invest stocks. We found cost of
equity by calculating beta risk free rate risk premium or we can say by CAPM (capital asset
pricing model). Cost of equity is 7.2%

rf 2.25%
equity risk premium 5.20%
beta 0.9524

using CAPM model

Re 7.20%

Dividend discount model

D1 4.76
price 628.1
g 3.51%
Re 4.27%

Dividend discount model

Dividend discount model is used to calculate discount rate of company or cost of equity. We
first calculate dividend growth by taking average growth of past dividends and grow the 2020
dividend by that growth rate. Based on dividend discounted model the cost of equity for firm
is 4.27%, which is less than capital asset pricing model. The reason behind this difference is
to use different dividend payout factors which ultimately causes impact on growth dividend.
In this model we assume that growth will remain constant from 2020 to onwards that is why
we use here Gordon growth model.

6
 date dividend Column1 % change
1-Dec-20 4.6   -4.17%
7-Jul-20 4.8   -29.41%
21-Apr-20 6.8   9.68%
6-Dec-19 6.2   3.33%
25-Apr-19 6   11.11%
4-Dec-18 5.4   8.00%
17-Apr-18 5   19.05%
5-Dec-17 4.2   5.00%
19-Apr-17 4   11.11%
29-Nov-16 3.6   1.41%
19-Apr-16 3.55    

growth 3.51%

D1 4.76

Cost of debt:
We take the 2020 financial statements of company to calculate the cost of debt, because the
YTM of company is not available. Total long term debt o company is 37531 million and total
interest expense is 366 million. By dividing interest expense with total debt, we got the cost
debt which I equal to 0.98%. as we know the corporate tax rate is 29%, so the after-tax cost
of debt Is 0.69%.

data is in million
company’s data
Interest expense 366
total long-term debt 37531
Rd 0.98%
tax 29% WACC
after tax cost of debt 0.69% Weighted average
cost of capital is
used to calculate per share price of stock. it is single discount rate which is weighted average
of both debt an equity we calculated WACC by using weights of capitalization. market value
of debt, cost of debt and market value of equity, cost of equity. WACC is 7%.

market capitalization 361500

7
 total long-term debt 37531
total capitalization 399031
we 90.59%
wd 9.41%
tax 29%
Rd 0.98%
Re 7.20%

WACC 7%

market price 628.1

no: of shares outstanding 503895883
market capitalization 3.16497E+11

Capital structure:
Market value of equity or market capitalization is found by using current stock price per
shares of company *total number of shares outstanding =628.10*503895883=316.5 billion.
Market value of debt is value of long-term debt which company issue 37531million so total
capitalization is 399031million. Therefore, weight of equity is approximately 90% and
weight of debt is approximately 10% which is calculated by dividing value o equity to total
capitalization and value of debt to total capitalization.
WACC IN Decision making Companies raise capital either by debt financing or by equity
financing to operate their business all comes with a cost and cost sociated with various
sources of capital is known as WACC. Analyst and investor use WACC to assess an
investor’s return on investment in company. It is average rate a company is expects to pay to
finance its assets. Weighted average cost of capital is single discount rate, it is used to
calculate per share price of stock. free cash flow of firm is discounted by WACC. Minimum
rate of WACC is required to calculate maximum value of firm. When WACC is less than
internal rate of return than we accept project, or it is helpful in decision making of new
investment. WACC helps company to identify optimal capital structure which is used to
calculate per share price.

MNCS Cost of capital

Due to different economic consideration, different accounting standards results in different
measures of book value and earnings. Poor quality of accounting rules results in delayed
recognition of value changes, due to different economic situation interest rate and tax rate is
different which ultimately impact on financial statements. Cost of debt to an MNC is the
function of two variables one is risk free rat of interest in the currency borrowed and the
premium for additional risk required by creditors. Since risk free rate nd risk premium differ
from country to country will not be the same in different countries.

8
Reference:
www.ustreas.gov
http://damodaran.com
https://www.investing.com/equities/l.v.m.h.
https://finance.yahoo.com/quote/MC.PA/