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Regression Statistics: Assignment-1: Hero Motorcorp 1) Calculation of Beta

1. The document contains an analysis of Hero MotorCorp including calculating beta, cost of equity, growth rate, and WACC. 2. Beta was calculated to be 0.80 using regression analysis. Cost of equity was determined to be 13.55% using the capital asset pricing model. 3. The growth rate was calculated to be 10.18% using the Gordon Growth DDM model with a cost of equity of 13.55% and dividend yield of 3.37%. 4. WACC was calculated to be 13.55% weighing equity at 99.78% and long term loans at 0.22%.

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Divyansh Singh
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68 views2 pages

Regression Statistics: Assignment-1: Hero Motorcorp 1) Calculation of Beta

1. The document contains an analysis of Hero MotorCorp including calculating beta, cost of equity, growth rate, and WACC. 2. Beta was calculated to be 0.80 using regression analysis. Cost of equity was determined to be 13.55% using the capital asset pricing model. 3. The growth rate was calculated to be 10.18% using the Gordon Growth DDM model with a cost of equity of 13.55% and dividend yield of 3.37%. 4. WACC was calculated to be 13.55% weighing equity at 99.78% and long term loans at 0.22%.

Uploaded by

Divyansh Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Name: Divyansh Singh

Roll Number: 18-MF-27


Assignment-1: Hero MotorCorp

1) Calculation of Beta
Regression Statistics
Multiple R 0.53
R Square 0.29
Adjusted R Square 0.28
Standard Error 0.04
Observations 73

ANOVA
Significance
df SS MS F F
Regression 1 0.0529 0.0529 28.4123 1.10533E-06
Residual 71 0.1323 0.0019
Total 72 0.1852

Standard t P- Lower Upper Lower Upper


Coefficients Error Stat value 95% 95% 95.0% 95.0%
Intercep -
t 0.00 0.01 0.52 0.61 -0.01 0.01 -0.01 0.01
X
Variable
1 0.80 0.15 5.33 0.00 0.50 1.10 0.50 1.10

Line Fit Plot


15%

10%

5%

0%
Y

-12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%

-5%

-10%

-15%
X Variable 1

Y Predicted Y
Name: Divyansh Singh
Roll Number: 18-MF-27
2) Cost of Equity Calculation
Particulars Values Source
Risk free Rate 6.64% RBI Website
Beta 0.80 Regression Output
Aswath Damodaran: Equity Risk Premiums (ERP):
Equity Risk Determinants, Estimation and Implications – The 2019
Premium 8.60% Edition
CMP 2,820.00 BSE
Cost of Equity (re) 13.55%

3) Calculation of Growth Rate(g) using Gordon Growth DDM Model


Particulars Values
Cost of Equity
(re) 13.55%
Dividend Yield 3.37%
Growth Rate (g) 10.18%

4) WACC of Hero Motorcorp


a. Input Values
All Values in ₹ Crore
Source Price
Equity 39.95
LTL 124.84
Finance cost on LTL 25.03
Face Value per share ₹2.00

b. Output Result
All Values in ₹ Crore
Sources Price Market Weights Pre-Tax Cost Post-Tax Cost WACC
Equity 56,329.50 99.78% 13.55% 13.55% 13.52%
LTL 124.84 0.22% 20% 13% 0.03%
Total 56,454.34 13.55%

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