You have joined Pluto Pvt. Ltd as a Finance manager.
You are given the following information:
Pluto Pvt Ltd. is a diversified manufacturing firm dealing with electrical appliances.
In 2012, the firm reported an operating income of Rs. 857.60 million and faced a tax rate of 35% on income. The firm had a book value of equity is Rs. 4068.3 million and book value of debt of Rs.1567.83 million at the end of 2011.The management of the firm is expecting a stable growth at a rate of 5% annually.
You are aware that the risk free rate is 9% and the company operates in a risk premium of 7.5%. You have been informed that the beta for the company has averaged around 1.2. At the same time the after tax cost of debt is 11%.
On the basis of the above mentioned information you as a finance manager are asked to provide the following :
Estimate the firms return on capital.
What would be the reinvestment rate of the firm?
What is the cost of equity under which Zurich is operating?
What is the cost of capital?
What is the expected free cash flow to the firm?
What is the value of the operating assets of firm?
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