Dear All,
Before I post my query, I would like to thank the members of this form, especially, Hariom Viradiya for their inputs.
Now, back to my query, as part of the DCF, I am in the process of identifying the WACC. Further, I have calculated the Ke - Cost of Capital and Kd - Cost of Debt. Now, while calculating WACC, I require the following clarification:
Share Capital & Debt Structure as per Projection:
Present Outstanding Shares – 1,00,000 Equity Shares of Rs. 10/- each
|
|
Current Year |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
Share Capital |
10,00,000 |
10,00,000 |
10,00,000 |
10,00,000 |
10,00,000 |
10,00,000 |
|
Additional Share Capital* |
-- |
-- |
5,00,000 |
5,00,000 |
8,00,000 |
8,00,000 |
|
Securities Premium |
20,00,000 |
20,00,000 |
20,00,000 |
20,00,000 |
20,00,000 |
20,00,000 |
|
Secured Loan (Bank) |
3,00,000 |
5,00,000 |
3,00,000 |
5,00,000 |
5,00,000 |
10,00,000 |
* Note: Additional Share Capital included Share Premium
Cost of Equity (Capital) (Ke) - 13.5%
Cost of Debt (Kd) - 17% - Assumed as per projections
The following are my queries:
1. While calculating WACC, should I use the Market Value of Equity Capital or Book Value of the Equity Capital? If Market Value should be used,
a) how do I determine the Market Value?
b) Market Value has to be determined as on which date? Present or Year 5?
2. Based on the above, how should I calculate weights, should it be based on Present Share Capital or Year 5 Share Capital & Debt?
Thank you
--
Rajan
CAclubindia
