In2004,TitanCementreportednetcapitalexpendituresof 49
millioneurosandanincreaseinnoncashworkingcapitalof
52 million euros. The resulting reinvestment rate is 58.5%:
The reinvestment rate has been volatile over the last five
years,andtheaveragereinvestmentrateoverthatperiodis
28.54%. We assume that Titan will maintain this average
reinvestmentrateforthenextfiveyears,inconjunctionwith
thereturnoncapitalinthemostrecentyearof19.25%.The
expected growth rate in operating income is 5.49%:
Usingabetaof0.93forTitanCement,aeurorisk-freerateof
3.41%,andariskpremiumof4.46%forGreece,weestimate
a cost of equity of 7.56%:
ThepretaxcostofdebtforTitan Cementforthenextfive
yearsis4.17%,basedonasyntheticbondratingofAAanda
default spread for Greece of 0.26%.
2 ThemarketvaluesofequityanddebtforTitanyieldadebt
ratio of 17.6% and a cost of capital of 6.78%:
Afteryear5,weassumethatthebetaforTitanCementwill
approach1, thatthe countryriskpremium forGreece will