38 “GOVERNANCE & AUDITED FINANCIAL STATEMENTS 2018” Axiata, accessed 6 May, 2020, , pg91.
8,789.6856 42,216.6743 919,507 x 100 = 4.59% Bank overdraft (overseas) 16,439 10.33 1,698.1487 Borrowings – financial institutions (Malaysia) 813,560 3.9 31,728.84 Total (RM’000 ) 919,507 24.05 42,216.6743 When the tax rate is 24%, the cost of debt is: R d = Interest rate x (1- Tax rate) R d = 4.59% x (1-24%) R d = 3.49% 3.4 Cost of Equity vs Cost Debt The net earnings of a corporation are the cost of equity. Higher net earnings suggest how good a firm exist. One perk of cost of equity is companies need not compensate funds. Two approach was used to enumerate cost of equity that are CAPM and DGM. The value of CAPM outnumbered DGM.
Contrastingly, cost of debt is secured from loans where it will be paid off afterwards which come in terms of loans and credits. Through quick growth, whereas an organization can sway lower value into higher value is an advantage of debt financing. Finally, Axiata will favour cost of equity than cost of debt considering in the event that the company’s debt is higher, the firm may fail to grow their debt level since other debts needs to be repaid. Nonetheless, debt level could be raised with greater cost of equity because they possess extra capital to do so. Provided the debt level surges, investors could react negatively and divest in the firm. 3.5 Weighted-Average Cost of Capital (WACC) WACC is able to be computed by utilizing the cost of capital of the company where respective categorization of capital is proportionally weighted. The equation of WACC is demonstrated beneath: 𝑊𝐴𝐶𝐶 = 𝑊 e * ? e + 𝑊 d * ? d *(1 − ? ) Where 𝑊 e = Weight of Equity, 𝑊 d = Weight of Debt; and ? = Tax Rate Initially, the market capitalisation, for Axiata is RM 35,600,000,000 where its share price is RM 3.93 like in Appendix 3.6. 39 Next, the sum of non-current liabilities represents the value of debt that is RM 22,238,151,000. 40 Hence, 𝑊 e =35,600,000,000/(35,600,000,000+22,238,151,000) = 61.55% 𝑊 d = 22,238,151,000/(35,600,000,000+22,238,151,000) = 38.45% From the previously calculated R e , R d and tax rate are 6.44%, 3.49% and 24% respectively. Therefore, WACC = 61.55%*6.44% + 38.45%*3.49%(1-24%) 39 “Integrated Annual Report 2018” Axiata, accessed 6 May,2020, , pg18. 40 “GOVERNANCE & AUDITED FINANCIAL STATEMENTS 2018” Axiata, accessed 6 May, 2020, , pg47
=4.98% According to the WACC, it is a positive value which means that the equity proprietor and lender are foreseen to earn their money. Moreover, equity and debt level can be raised by the firm to invest more in the enterprise. Investors will be hopeful since WACC is positive where the firm able to raise their equity and debt level. 4.0 Financial Statement Analysis The last part of this report is to conduct a financial statement analysis in order to evaluate Axiata Group Berhad financial strength. The purpose of this analysis is to have clearer view for the company profit and growth, and performance, in contrast with the company’s competitors in cross-sectional analysis. 4.1 Measurement of Company’s Market-Valued One of the essential aspects that we should focus in analysing Axiata Group Berhad
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- Fall '16
- Saifur Rahman
- Financial Ratio, Dividend yield, axiata group berhad