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Star River Electronics Ltd.

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by

Abril Guzman

on 6 November 2014

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Transcript of Star River Electronics Ltd.

Star River Electronics Ltd.
WEIGHTED AVERAGE COST OF CAPITAL (WACC)
WACC=Wd*Kd (1-t)+ We*Ke
VALUE OF EQUITY
VALUE OF DEBT
From Exhibit 2 we take the market value of debt
Short term debt = 84,981
Long term debt = 18,200
WEIGHT OF EQUITY
E is the market value of Equity
D is the market value of Debt
E+D is the corporation value
Kd, cost of debt (required yield on new debt, YTM)
Ke, cost of equity
Wd and We, are percentages of debt and equity
T is marginal tax rate
We= E/ (E+D)
From Exhibit 2 and Exhibit 5 we took Book value * Market/Book of peer
Exhibit 2. Book value of equity
Exhibit 5. Market/Book of peers average
E= (47,004)*((6.39/1.46)+(27.48/7.06))/2

E= (47,004)*(4.14)

E= 194,596

E= 194.6 Thousand Singapore Dollars
Abril Guzman
Brianna Mahler
Esteban Pinilla Rey
Trent Woerner
Advanced Financial Analysis- Case 26
WEIGHT OF DEBT
Wd= D/ (E+D)
E is the market value of Equity
D is the market value of Debt
E+D is the corporation value
D = 84,981 + 18,200

D = 103,181

D = 103.2 Thousand Singapore Dollars

CORPORATION VALUE OR CAPITAL STRUCTURE
E + D
=196.6 + 103.2
=297.8
WEIGHT OF DEBT
= 103.2 /297.3
= 0.347
= 34.7 %
WEIGHT OF EQUITY
= 194.6 / 297.3
= 0.653
=65.3 %
COST OF DEBT
Exhibit 2 at the bottom

The second component of debt is SGD 8.2 million from a 5-year bond issue on private placement basis last July 1, 2000 at a price of SGD97 and a coupon of 5.75% paid semiannually.
N = 4
PV = -970
PMT = 57.5
FV = 1000
Solve for I/Y

YTM = 6.6%
N = 8
PV = -970
PMT = 28.75
FV = 1000
Solve for I/Y * 2

YTM = 6.6%
Kd= 6.6%
COST OF EQUITY
CAPM = Risk Free Rate + B (Risk Premium)

Asset unlevered B = Average of peers (unlevereded Betas)

Unlevered B = Levered B / (1+((1 - Tax Rate) x (Debt/Equity)))
Finding Beta
Market value of Debt = (Book D/E)*(Book Val per share)*(# of shares outs)

= (1.70) * (1.46)* (177.2)
=
439.8
Market value of Equity = (Market Price per Share)*(# of shares outs)

= (6.39) * (177.2)
=
1,132
Unlevered B = 1.56
(1+((1-0.245) * (439.8 / 1,132)

= 1.21
For STOR-Max

Unlevered B = 1.33
For Wintronics
Exhibit 5
COST OF EQUITY
CAPM
Star River unlevered B = average of peers unlevered Betas
= (1.21 + 1.33) /2
=
1.27

Levered B = Unlevered * (1+(( 1 - Tax Rate) x (Debt / Equity)))
= 1.27 (1+(( 1 - 0.245) x (103.2 / 194.6)))
= 1.27 * 1.40
=
1.78

Exhibit 5 Market risk premium = 6%

Exhibit 2 10- year Singapore Treasury Bond currently yielded 3.6%

CAPM

Ke = 0.036 + 1.78 (0.06)
= 0.1428
=
14.3 %
WACC = Wd * Kd ( 1-t ) + We * Ke
Wd = 34.7 %
Kd = 6.6 %
We = 65.3 %
Ke = 14.3 %
Tax = 24.5 %
WACC = 0.347 * 0.066 (1-0.245) + 0.653 * 0.143
WACC = 0.1106 or 11.1 %
ANALYSIS OF THE PACKAGING MACHINE INVESTMENT
FORECASTING ASSUMPTION
HISTORICAL & FORECAST SOURCES & USES
OF FUNDS STATEMENTS
HISTORICAL AND FORECAST
INCOME STATEMENT
HISTORICAL AND FORECAST
BALANCE SHEETS
HISTORICAL & FORECAST ANALYTICAL RATIOS
Full transcript