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