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BAV

Session 13

• In long term RoE  CoE • In long term RoC  CoC • Two phase • Three Phase .

00% .reported profit 100 RoC 20% CoC 10% Reinvests 50% Growth rate Stable Growth rate Stable reivestment rate 10.0% 20%*50% 5% 25.

61051 50 1625 .21 50 3 133.205 80.41 161.1 50 1825 2 121 60.1 66.5255 1.553 1.553 1 110 55 Reported income income after reinvestment PV factors Total PV 1.5 1.55 4 5 146.4641 1.051 73.1036 25% Value from 6th year 2536.331 50 2536.Case A sixth year income Reinvestment 169.

1 146.5255 1691.61051 50 1100 .21 1.1 1.036 PV factors Total PV 1300 1.205 80.051 55 60.1036 Reinvestment Value from 6th year 50% 1691.4641 1.Case B sixth year income 169.036 Reported income 100 income after reinvestment 1 2 3 4 5 110 121 133.331 50 50 50 1.5 66.41 161.55 73.

93 Reported income 100 income after reinvestment 1 2 3 4 5 110 121 133.41 161.21 1.55 73.Case C sixth year income 167.93 PV factors Total PV 1300 1.6306 1674.051 55 60.61051 50 1100 .1 146.331 50 50 50 1.4641 1.5 66.493 Reinvestment Value from 6th year 40% 1674.205 96.1 1.

205 96.93 1.1 50 1.41 161.331 50 4 5 146.1 66.55 1.6306 1674.5 3 133.4641 1.Case D sixth year income Reinvestment 167.493 0% Value from 6th year 1674.21 50 1.051 73.61051 50 1100 .93 Reported income 100 income after reinvestment PV factors Total PV 1300 1 110 55 2 121 60.

Dividend Discount Model • Three phase dividend discount model • RoE • CoE • Payout ratio .

38% Growth Beta R free Mkt Premium CoE Growth rate Reinvestment Stable 1.27 16.DDM RoE DPS EPS Payout ratio Reinvestment Growth rate 23.70% 1 6% 5.50% 4% 34.53% 83.47% 19.50% 11.1 6% 7% 13.22% 5.5 33.78% .

44% CoE 13.08% Rate 16.74% 55.15% 7.08% 4.82% 12.22% Growth 3.94% 11.31% 13.27% 36.26% 12.48% 65.38% 11.01% 45.50% 9.00% .23% 10.DDM Year 1 2 3 4 5 0.74% Payout ratio 26.

67 93.02 11.75 19.53 69.24 117.88 0.68 7.45 15.57 80.53 PV of terminal Value 346.60 67.72 47.50 6.25 53.37 0.84 9.42 56.95 EPS Payout Terminal Value 1178.36 11.77 0.82 106.27 39.37 6.60 0.53 5.33 24.30 130.57 7.DDM year 0 1 2 3 4 5 6 7 8 9 10 11 33.77 6.04 Total Value of equity 472.17 13.62 22.06 6.48 .53 0.76 24.46 0.52 84.02 125.32 135.99 Discounting factor 0.68 0.41 0.33 0.65 38.29 PV of Dividend 5.

FCFE Cost of equity beta 1 R Free 5% Mkt Premium 4% CoE 9.00% Stable period growth rate RoE equity reinvestment rate 4% 12% 33.33% .

1 146.5 66.93 43.5 66.051 capex 75 82.3153 .5729 39.923 48.51 100 110 121 133.205 80.05 6.FCFE 0 1 2 3 4 5 1000 1100 1210 1331 1464.085 117.41 161.205 80.5 97.55 73.825 109.8075 120.35 33 36.5255 5 5.55 73.5 90.7935 129.1051 88.641 16.1 1610.5255 NWC 50 55 60.3 Revenue net income Change NWC Net Debt 10 FCFE Dividends 30 99.5 6.1 13.7883 107.655 7.31 14.3205 11 12.75 depreciation 50 55 60.

411582 1.33% CoE 9% Growth rate 4% Value 2233.051*1.19266 81.538624 81.739 .68927 83.7935 129.49304 161.1881 1.09 1.0065 1.5 97.5729 Terminal Value 2233.FCFE Value of equity at end of 6th Year NetIncome Equity Reinvestment rate 167.295029 1.35 3 4 5 107.3522 FCFE 1 2 88.04 33.352 PV Value PV Value of equity 1865.93755 82.44789 1535.085 117.