Assignment No:- 2

Financial Management
Introduction:- In this assignment we need to collect data of a company of past
10 years and do certain calculations. I have selected EDELWEISS as my
company which is listed in NSC.
We need to find out the following things:

EPS
DPS
BOOK VALUE PER SHARE
AVERAGE MARKET VALUE PER SHARE

(Source of the company information:-money

Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Year
2003
2004
2005
2006
2007
2008
2009

Earnings Per
Share (Rs.)
0.65
7.85
16.97
9.56
6.03
3.84
3.52
4.56
0.78
0.91

Growth
Rate (%)
1107.69
116.18
-43.67
-36.92
-36.32
-8.33
29.55
-82.89
16.67

Dividend Gain (%)

Dividend Per
Share (Rs.)
0.25
0.4
0.5
0.65
0.25
2
3
10
0.6
0.6

Capital Gain (%)

2.90
2.33
1.72
0.45
1.05
1.46

control.com)

Growth
Rate (%)
60.00
25.00
30.00
-61.54
700.00
50.00
233.33
-94.00
0.00

Market value Per

Share(Rs.)
13.8
21.425
37.75
55.55
190.15
204.975
124.4
138.7
93.25
57.875

Total Gain (%)

Growth Rate
(%)

55.25
76.20
47.15
242.30
7.80
-39.31

58.15
78.53
48.87
242.75
8.85
-37.85

Growth
Rate (%)
55.25
76.20
47.15
242.30
7.80
-39.31
11.50
-32.77
-37.94

0.35
-0.38
3.97
-0.96
-5.28

2010
2011
2012

8.04
0.43
0.64

11.50
-32.77
-37.94

19.53
-32.34
-37.29

-1.52
-2.66
0.15

PayoutRatio
Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Payout Ratio
0.385
0.051
0.029
0.068
0.041
0.521
0.852
2.193
0.769
0.659

This assignment is based on the concept of cost of capital.

Cost of capital :- Cost of capital represents the rate of return which the company
must pay to the suppliers of capital for use of their funds. It is the minimum rate of
return that a project must yield to keep the value of the enterprise intact. Its also
helps to decide whether the project is worth undertaking or not .
Dividend Growth Model
Ke=((Div0(1+g))/P0)+g

Particulars
EPS
DPS
Market
Total

Growth Rates
1.04
1.05
1.17
0.99

Cost of Equity
1.06
1.07
1.20
1.01

Cost of equity share capital under capital assets price method (capm):- CAPM is an
alternative method to measure the cost of equity other than the dividend method
which is directly based on risk consideration.

Ke =Rf + B (Rm-Rf)
Rf
Rm

8.00%
10.50%
1.2

Ke

11.00%

Weighted average cost of capital:- It is the rate of return that is required to be

earned by the firm as to satisfy the needs of different investors. As it gives the
minimum rate of return on the assets of the firm it is calculated as weighted avg
instead of simple avg.
1 Ke=1.06
Sources of
Funds
Equity
Debt (inRs. In
Cr.)
Reserves and
Surplus
Total

2 Ke = 1.07
Sources of
Funds
Equity
Debt (inRs.
In Cr.)
Reserves
and Surplus
Total

3 Ke = 1.20
Sources of
Funds

Book
Book Value of
Cost of
Wi*
Value
Weights
Capital
Ki
75.68
0.0203
1.0600 0.02
15
2382.6
0.6382
0.0226 0.01
1
44
1274.9
0.3415
1.0600 0.36
5
20
3733.2
0.39
4
79

Book
Value
75.68
2382.
61
1274.
95
3733.
24

Book
Value

Book Value
of Weights
0.0203
0.6382
0.3415

2383.049
9

0.02279
7126

Cost of
Capital

Wi*Ki
Market Mkt Value Wi*Ki
(Book
Value
Weights
(Market
Value)
Value)
1.07
0.022 0.4399
0.00018
0.000
0.76
0.485 2382.6
1.000
0.760
100
1.06
0.362
0.869

Book Value
of Weights

Market
Mkt Value
Wi*Ki
Value
Weights
0.4399
0.0002 0.00019
5649
2382.610
0.9998 0.02260
0
1477

Cost of
Capital

Wi*Ki
(Book
Value)

2383.0
50

Market
Value

0.760

Mkt Value
Weights

Wi*Ki
(Market
Value)

Equity
Debt (inRs.
In Cr.)
Reserves
and Surplus
Total

4 Ke = 1.01
Sources of
Fund
Equity
Debt (inRs.
In Cr.)
Reserves
and Surplus
Total

5 Ke = 11
Sources of
Funds
Equity
Debt (inRs.
In Cr.)
Reserves
and Surplus
Total

75.68
2382.
61
1274.
95
3733.
24

Book
Value

1.200
0.760

0.024
0.485

0.342

1.060

0.362
0.871

Book Value
of Weights

75.68
2382.
61
1274.
95
3733.
24

Book
Value

0.020
0.638

0.020
0.638
0.342

75.68
2382.
61
1274.
95
3733.
24

0.020
0.638
0.342

2383.0
50

0.00018
1.000

0.00022
0.760

0.760

Cost of
Capital

Wi*Ki
Market Mkt Value Wi*Ki
(Book
Value
Weights
(Market
Value)
Value)
1.010
0.020 0.4399
0.000
0.000
0.760
0.485 2382.6
1.000
0.760
100
1.060
0.362
0.868

Book Value
of Weights

0.4399
2382.6
100

2383.0
50

0.760

Cost of
Capital

Wi*Ki
Market Mkt Value Wi*Ki
(Book
Value
Weights
(Market
Value)
Value)
11.000
0.223 0.4399
0.000
0.002
0.760
0.485 2382.6
1.000
0.760
100
1.060
0.362
1.070

2383.0
50

0.762

Conclusion and Analysis

The above calculation states that the cost of capital reduces with the increasing
types of sources of funds i.e. more debt reduces overall cost of capital for the
company. These helps the firm in creating a tax shield and reduce the interest
amount of the loan taken by banks and other sources.