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

Transcript of Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components...

Page 1: Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate.

— 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

Page 2: Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate.

— 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

Page 3: Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate.

— 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

Page 4: Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate.

— 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

Page 5: Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate.

— 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

Page 6: Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate.

— 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

Page 7: Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate.

— 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

Page 8: Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate.

— 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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Page 9: Background Synergy Value Evaluation Equity Value Cost of Capital Calculation – WACC components Cost of equity Cost of debt D/E ratio Tax rate.

— Proudly presented by Group 4

Background SynergyValue

EvaluationEquity Value

HUIYUAN VS COKE-COLA


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