The current EPS of Vinaya Enterprises is Rs. 4.

The company has shown an extraordinary growth of 40 Percent in it's profits

and revenues in last few years. The high growth rate of 40 perrcent would like to continue for next 5 years after which the
growth rate in earning will decline from 40 percent to 10 percent during thhe next 5 years and remain stable at 10 percent
thereafter. The decline in the growth rate during the 5 year transition period will be equal and linear. Currently the
company's payout ratio is 10 Percent and will be same for next years. From the begining of 6th year till the end of 10th year,
the pay out ratio will linearly incrrease and stabilize at 50 ercent at the end of 10th year. The company present beta is 1.75
and will remain the same for next 5 years and from the 6th year, the beta of the stock will deline linearly from 1.75 and
stabilize at 1.1 at the end of 10th year. Assume the risk free rate of return is 6.4 percent and risk premium of the market is
5.5 percent.
f 40 Percent in it's profits
t 5 years after which the
main stable at 10 percent
ear. Currently the
ar till the end of 10th year,
pany present beta is 1.75
linearly from 1.75 and
remium of the market is
Beta Formula

Method 1

N S X Y - (S X ) (S Y )
b= 2 2
N S X - (S X )
Method 2

Beta = COVAR(range of % change of equity,range

of % change of index)/VAR(range of % change of
index)

Method 3

Beta = =SLOPE(range of % change of equity,

range of % change of index)
Beta (β) Calculator

Individual Stock S&P 500 Index

Date Price Return Date Price
1/2/2018 15.78 1/2/2018 2,696
1/9/2018 16.38 3.8% 1/9/2018 2,751
1/16/2018 16.67 1.8% 1/16/2018 2,776
1/23/2018 17.17 3.0% 1/23/2018 2,839
1/30/2018 17.02 -0.9% 1/30/2018 2,822
2/6/2018 16.31 -4.2% 2/6/2018 2,695
2/13/2018 16.00 -1.9% 2/13/2018 2,663
2/20/2018 16.43 2.7% 2/20/2018 2,716
2/27/2018 16.97 3.3% 2/27/2018 2,765

Beta (β) 1.06

Beta (β) 1.21

Return

2.0%
0.9%
2.3%
-0.6%
-4.5%
-1.2%
2.0%
1.8%
Calculating Stock Beta in Excel
Date Adj Close Adj Close
IBM S&P500 pfor ibm p for s$p
1/3/2011 145.61 1271.87
1/4/2011 145.77 1270.2 0.110% -0.13%
1/5/2011 145.19 1276.56 -0.398% 0.50% beta 0.81
1/6/2011 146.78 1273.85 1.095% -0.21%
1/7/2011 146.05 1271.5 -0.497% -0.18% beta 0.82
1/10/2011 145.77 1269.75 -0.192% -0.14%
1/11/2011 145.41 1274.48 -0.247% 0.37%
1/12/2011 147.21 1285.96 1.238% 0.90%
1/13/2011 146.93 1283.76 -0.190% -0.17%
1/14/2011 148.1 1293.24 0.796% 0.74%
1/18/2011 148.74 1295.02 0.432% 0.14%
1/19/2011 153.72 1281.92 3.348% -1.01%
1/20/2011 153.82 1280.26 0.065% -0.13%
1/21/2011 153.53 1283.35 -0.189% 0.24%
1/24/2011 157.61 1290.84 2.657% 0.58%
1/25/2011 159.39 1291.18 1.129% 0.03%
1/26/2011 159 1296.63 -0.245% 0.42%
1/27/2011 159.03 1299.54 0.019% 0.22%
1/28/2011 157.19 1276.34 -1.157% -1.79%
1/31/2011 159.95 1286.12 1.756% 0.77%
2/1/2011 161.49 1307.59 0.963% 1.67%
2/2/2011 161.23 1304.03 -0.161% -0.27%
2/3/2011 161.46 1307.1 0.143% 0.24%
2/4/2011 161.92 1310.87 0.285% 0.29%
2/7/2011 162.73 1319.05 0.500% 0.62%
2/8/2011 164.59 1324.57 1.143% 0.42%
2/9/2011 163.21 1320.88 -0.838% -0.28%
2/10/2011 162.65 1321.87 -0.343% 0.07%
2/11/2011 162.41 1329.15 -0.148% 0.55%
2/14/2011 161.79 1332.32 -0.382% 0.24%
2/15/2011 161.41 1328.01 -0.235% -0.32%
2/16/2011 161.97 1336.32 0.347% 0.63%
2/17/2011 162.8 1340.43 0.512% 0.31%
2/18/2011 163.39 1343.01 0.362% 0.19%
2/22/2011 160.53 1315.44 -1.750% -2.05%
2/23/2011 158.78 1307.4 -1.090% -0.61%
2/24/2011 159.36 1306.1 0.365% -0.10%
2/25/2011 160.86 1319.88 0.941% 1.06%
2/28/2011 160.46 1327.22 -0.249% 0.56%
3/1/2011 158.57 1306.33 -1.178% -1.57%
3/2/2011 158.76 1308.44 0.120% 0.16%
 3/3/2011 162.05 1330.97 2.072% 1.72%
3/4/2011 160.41 1321.15 -1.012% -0.74%
3/7/2011 158.53 1310.13 -1.172% -0.83%
3/8/2011 160.86 1321.82 1.470% 0.89%
3/9/2011 164.41 1320.02 2.207% -0.14%
3/10/2011 160.6 1295.11 -2.317% -1.89%
3/11/2011 161.01 1304.28 0.255% 0.71%
3/14/2011 159.97 1296.39 -0.646% -0.60%
3/15/2011 157.63 1281.87 -1.463% -1.12%
3/16/2011 151.66 1256.88 -3.787% -1.95%
3/17/2011 152.83 1273.72 0.771% 1.34%
3/18/2011 154.52 1279.21 1.106% 0.43%
3/21/2011 156.3 1298.38 1.152% 1.50%
3/22/2011 156.61 1293.77 0.198% -0.36%
3/23/2011 158.13 1297.54 0.971% 0.29%
3/24/2011 158.64 1309.66 0.323% 0.93%
3/25/2011 160.76 1313.8 1.336% 0.32%
3/28/2011 159.96 1310.19 -0.498% -0.27%
3/29/2011 161.45 1319.44 0.931% 0.71%
3/30/2011 162.17 1328.26 0.446% 0.67%
3/31/2011 161.64 1325.83 -0.327% -0.18%
4/1/2011 162.83 1332.41 0.736% 0.50%
4/4/2011 162.81 1332.87 -0.012% 0.03%
4/5/2011 162.55 1332.63 -0.160% -0.02%
4/6/2011 162.6 1335.54 0.031% 0.22%
4/7/2011 162.94 1333.51 0.209% -0.15%
4/8/2011 162.61 1328.17 -0.203% -0.40%
4/11/2011 162.51 1324.46 -0.061% -0.28%
4/12/2011 161.82 1314.16 -0.425% -0.78%
4/13/2011 162.51 1314.41 0.426% 0.02%
4/14/2011 163.52 1314.52 0.622% 0.01%
4/15/2011 164.75 1319.68 0.752% 0.39%
4/18/2011 164.48 1305.14 -0.164% -1.10%
4/19/2011 163.95 1312.62 -0.322% 0.57%
4/20/2011 163.31 1330.36 -0.390% 1.35%
4/21/2011 166.8 1337.38 2.137% 0.53%
4/25/2011 166.2 1335.25 -0.360% -0.16%
4/26/2011 167.01 1347.24 0.487% 0.90%
4/27/2011 168.88 1355.66 1.120% 0.62%
4/28/2011 169.28 1360.48 0.237% 0.36%
4/29/2011 169.08 1363.61 -0.118% 0.23%
5/2/2011 170.64 1361.22 0.923% -0.18%
5/3/2011 171.35 1356.62 0.416% -0.34%
5/4/2011 169.12 1347.32 -1.301% -0.69%
5/5/2011 166.98 1335.1 -1.265% -0.91%
 5/6/2011 168.16 1340.2 0.707% 0.38%
5/9/2011 168.37 1346.29 0.125% 0.45%
5/10/2011 169.64 1357.16 0.754% 0.81%
5/11/2011 168.77 1342.08 -0.513% -1.11%
5/12/2011 171.49 1348.65 1.612% 0.49%
5/13/2011 169.18 1337.77 -1.347% -0.81%
5/16/2011 168.13 1329.47 -0.621% -0.62%
5/17/2011 169.76 1328.98 0.969% -0.04%
5/18/2011 169.7 1340.68 -0.035% 0.88%
5/19/2011 169.85 1343.6 0.088% 0.22%
5/20/2011 169.42 1333.27 -0.253% -0.77%
5/23/2011 167.53 1317.37 -1.116% -1.19%
5/24/2011 167.26 1316.28 -0.161% -0.08%
5/25/2011 167.02 1320.47 -0.143% 0.32%
5/26/2011 166.46 1325.69 -0.335% 0.40%
5/27/2011 166.77 1331.1 0.186% 0.41%
5/31/2011 168.2 1345.2 0.857% 1.06%
6/1/2011 165.84 1314.55 -1.403% -2.28%
6/2/2011 165.37 1312.94 -0.283% -0.12%
6/3/2011 164.33 1300.16 -0.629% -0.97%
6/6/2011 164.04 1286.17 -0.176% -1.08%
6/7/2011 162.98 1284.94 -0.646% -0.10%
6/8/2011 163.63 1279.56 0.399% -0.42%
6/9/2011 164.13 1289 0.306% 0.74%
6/10/2011 162.47 1270.98 -1.011% -1.40%
6/13/2011 162.46 1271.83 -0.006% 0.07%
6/14/2011 163.41 1287.87 0.585% 1.26%
6/15/2011 161.63 1265.42 -1.089% -1.74%
6/16/2011 161.96 1267.64 0.204% 0.18%
6/17/2011 163.73 1271.5 1.093% 0.30%
6/20/2011 164.3 1278.36 0.348% 0.54%
6/21/2011 165.5 1295.52 0.730% 1.34%
6/22/2011 164.96 1287.14 -0.326% -0.65%
6/23/2011 165.4 1283.5 0.267% -0.28%
6/24/2011 164.35 1268.45 -0.635% -1.17%
6/27/2011 166.89 1280.1 1.545% 0.92%
6/28/2011 169.27 1296.67 1.426% 1.29%
6/29/2011 169.8 1307.41 0.313% 0.83%
6/30/2011 170.81 1320.64 0.595% 1.01%
7/1/2011 173.78 1339.67 1.739% 1.44%
7/5/2011 174.67 1337.88 0.512% -0.13%
7/6/2011 176.94 1339.22 1.300% 0.10%
7/7/2011 175.71 1353.22 -0.695% 1.05%
7/8/2011 175.72 1343.8 0.006% -0.70%
7/11/2011 174.23 1319.49 -0.848% -1.81%
7/12/2011 173.3 1313.64 -0.534% -0.44%
7/13/2011 173.56 1317.72 0.150% 0.31%
7/14/2011 173.47 1308.87 -0.052% -0.67%
7/15/2011 174.78 1316.14 0.755% 0.56%
7/18/2011 174.52 1305.44 -0.149% -0.81%
7/19/2011 184.41 1326.73 5.667% 1.63%
7/20/2011 182.85 1325.84 -0.846% -0.07%
7/21/2011 184.1 1343.8 0.684% 1.35%
7/22/2011 184.38 1345.02 0.152% 0.09%
7/25/2011 182.9 1337.43 -0.803% -0.56%
7/26/2011 182.14 1331.94 -0.416% -0.41%
7/27/2011 180.56 1304.89 -0.867% -2.03%
7/28/2011 181.01 1300.67 0.249% -0.32%
7/29/2011 181.06 1292.28 0.028% -0.65%
Electronics Galore has 950,00 shares of common stock outstanding a
The company also has 40,000 bonds outstanding that are quoted at 1
weight should be given to the debt when the firm computes its weigh

qty price total

equity 95000 38 3610000
debt 40000 106 4240000
7850000
Weight of 54% total weight
we of equ 46% 100%
ock outstanding at a market price of 38 a share.
at are quoted at 106 percent of face value. What
omputes its weighted average cost of capital?
 CAPM(es
Security Expected return Beta timated
return)

A 33.00% 1.7 15.800% undervalued Ke= RF+(Rm-Rf)*B

B 13.00% 1.4 14.60% overvalued
C 26.00% 1.1 13.40% undervalued rf 9%
D 12.00% 0.95 12.80% overvalued rm 13.00%
E 21.00% 1.05 13.20% undervalued
F 14.00% 0.7 11.80% undervalued
Nifty 13.00% 1
T-bills 9.00% 0

Expected return > Estimated return = under-priced

Expected return < Estimates return = overpriced
Ke Calculation
Valuation

Growth Assumptions Debt Equity Weightage

Growth rate of Indusrty 15% E/(D+E)
D/(D+E)

CAPM Assumptions Interest Rate (%)

Ke 9.3% rf+(m-rf)*b Tax Rate (@)
RFR 6.46% (rbi gov sec 10 yrs yeild)
Beta 0.80 assume WACC Calculation
Rp = Rm - Rf 3.6% WACC

market return

nifty beginning valu 1000 1992

nifty ending value 17700 2022
time 30.00

rm(cagr) 10.05%
 70%
30%

6.50%
30%

7.90% (kd*(1-t)*wd)+(ke*we)
securites beta expected rke(capm)
a 1.1 8% 9.00% overvalued Ke= RF+(Rm-Rf)*B
b 1.3 12% 10.00% undervalued
c 1.2 9% 9.50% overvalued
d 1.9 15% 13.00% undervalued
e 0.7 7% 7.00% overvalued
risk free rate(rf) 3.50%
risk pre(rp) 5% rp= rf-rm

security market line

16%
15%
14%

12% 12%

10%
9%
8% 8%
7%
6%

4%

2%

0%
0.6 0.8 1 1.2 1.4 1.6 1.8 2
Ke= RF+(Rm-Rf)*B