Weighted Average Cost of Capital for Shree Cement Limited

Code : FAC0055

Year :
2019

Industry : Cement

Region : India

Teaching Note:Available

Structured Assignment :Not Available

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Abstract: The case study ‘Weighted Average Cost of Capital of Shree Cement Limited’ provides a fundamental understanding of the Weighted Average Cost of Capital (WACC), cost of equity, and cost of debt. The case helps to understand various methods of calculating the cost of equity such as the Capital Asset Pricing Model (CAPM) and the Dividend Discounted Model (DDM). It also covers the estimation of cost of equity using fundamental beta which is applicable in case of an unlisted firm. The case is based on a discussion between a group of first-year MBA students and Dr. John Martin (Martin), a professor of Finance. The discussion starts with the concept of cost of equity and gradually leads to WACC. The case concludes with parameters being set for the students to calculate the cost of equity using various methods, cost of debt, and ultimately WACC for Shree Cements Limited.


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Pedagogical Objectives:

  • To understand the relevance of the cost of capital in financing and investment decisions

  • To understand how to estimate the cost of equity using the different methods available

  • To understand how to estimate the cost of equity using fundamental beta

  • To understand how to estimate the cost of debt

  • To understand the importance of capital mix in the estimation of WACC


    Keywords : Cost of Equity, Cost of Debt, Cost of Capital, Beta WACC, CAPM, DDM, Levered Beta, Unlevered Beta, Risk free rate, Market return


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