Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )

(Hop HipldF0AV) #1

Normalized net capital expenditures = 170.38 million CY


Normalizednoncashworkingcapitalchange=39.93million
CY


Normalizednetdebtcashflows=92.17millionCY(Debt
issues − Repayments)


Weassume thatthe returnonequity willincrease to 12%
(from 8.06%) over the next five years, resulting in an
expected growth rate of 13.74%.


Notethatthesecondtermintheequationmeasuresgrowth
relatedtousingexistingassetsmoreefficientlyoverthenext
fiveyears.Wearealsoassumingthatnewinvestmentswill
generate returns on equity of 12% starting next year.


Toestimatethecostofequity,wewilluseabetaof0.8for
Tsingtaoinperpetuity.Inconjunctionwitharisk-freerateof
5.5%inChineseyuanandariskpremiumof5.6%(composed
of a mature market premium of 4% and a country risk
premium of 1.60 for China

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