24. The cost of equity is almost similar to overall Cost of Capital.
25. The Beta Using CAPM and Beta Using Pure Play are almost similar; there
26. is a bit difference between both implying that the risks of individual SBUs are not similar to the overall risk assumed by the ITC.
27.
28. The Cost of Capital tends to be lower i.e... In the range of 14% - 16%, this implies that the companies have a very low cut off point for any new and existing project.
29.
Editor's Notes
NOTE: Mention about the comparision of Proxy companies & the market indexes usedTax rate for pure play firms 33.99% (as per the Income Tax Act, 1961)Tax rate for ITC 32%Assumptions madeCapital employed in each business segment of ITC Ltd. = Segment Assets – Segment Liabilities. At the time of relevering beta (β) of each pure play firm to reflect the financial risk of ITC Ltd., the Debt-Equity ratio of entire ITC Ltd is used.
NOTE: The Market value is considered based on Share price as on 31st March 2009 i.e. Market Capitalization.