Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components...
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— Proudly presented by Group 4 Backgroun d Syner gy Value Evaluatio n Equity Value • Cost of Capital Calculation – WACC components • Cost of equity • Cost of debt • D/E ratio • Tax rate HUIYUAN VS COKE-COLA
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Transcript of Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components...
— Proudly presented by Group 4
Background SynergyValue
EvaluationEquity Value
• Cost of Capital Calculation– WACC components• Cost of equity• Cost of debt• D/E ratio• Tax rate
HUIYUAN VS COKE-COLA
— Proudly presented by Group 4
Background SynergyValue
EvaluationEquity Value
• Cost of Capital Calculation– Cost of Equity• Cost of equity components
– Beta: 2.60 (From Quamnet.com)– Risk-free rate: 2.96%– Market return: 15.19%
• Cost of equity calculation– CAPM = Risk free rate + Beta × (Market return – Risk-free rate)
– 34.75%
HUIYUAN VS COKE-COLA
— Proudly presented by Group 4
Background SynergyValue
EvaluationEquity Value
• Cost of Capital Calculation– Cost of Equity• Risk-free rate: Exchange Fund Notes during 15 years on
September, 2008
HUIYUAN VS COKE-COLA
— Proudly presented by Group 4
Background SynergyValue
EvaluationEquity Value
• Cost of Capital Calculation– Cost of Equity• Market return: Daily geometric average growth rate of
Hang Seng Index of the last 30 years, then obtain effective annual growth rate
HUIYUAN VS COKE-COLA
— Proudly presented by Group 4
Background SynergyValue
EvaluationEquity Value
• Cost of Capital Calculation– Cost of Debt• Retrieved directly from Huiyuan’s 2007 annual report• 6.49%
HUIYUAN VS COKE-COLA
— Proudly presented by Group 4
Background SynergyValue
EvaluationEquity Value
• Cost of Capital Calculation– Cost of equity = 34.75%– Cost of debt = 6.49%– D/E ratio = 0.33– Tax rate = 33% (from Huiyuan’s 2007 annual
report)
HUIYUAN VS COKE-COLA
— Proudly presented by Group 4
Background SynergyValue
EvaluationEquity Value
• Cost of Capital Calculation– D/E ratio calculation• Book value of debt = HKD 2,225,987,000
– Total liabilities from Huiyuan's 2007 consolidated balance sheet
• Market value of equity = HKD 6,741,866,376– Share price = HKD 4.59
» Average closing price as quoted on the Stock Exchange for the 60 trading days prior to and including the last trading date
– Number of shares = 1,468,816,204» Stated in Huiyuan’s 2007 annual report
HUIYUAN VS COKE-COLA
— Proudly presented by Group 4
Background SynergyValue
EvaluationEquity Value
• Cost of Capital Calculation– WACC Formula
– Cost of Capital = 27.20%
HUIYUAN VS COKE-COLA
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— Proudly presented by Group 4
Background SynergyValue
EvaluationEquity Value
HUIYUAN VS COKE-COLA
