Reference no: EM133233949

Tata Steel Case and WACC a) The summary balance sheet of Tata Steel Limited is given in the accompanying Excel file in the sheet named Tata Steel details. See columns B 4 to D 74 b) The break up of the borrowings which is split under the non current and current liabilities are also provided to you in the same excel sheet. See columns G 8 to H 18 c) The details of debentures issued including the YTM for them where applicable is given in the same sheet. See column G 21 to L 36. All debentures pay annual coupon on actual upon 365 basis. d) The historical prices of Tata steel and Nifty 500 are also given in the same sheet See columns G 40 to L 92 e) The market risk premium to consider for the Indian market is 12.4% and the Risk Free rate to be factored is given as 6.5% f) For cost of debentures use a weighted average cost for debentures and for this purpose repo rate is 4.65%. You can take 6.9% as the cost of term loans from banks and 6% as the cost for commercial papers. For lease take the cost as 7.6% g) Assume Tax rate of 30%

Given the information you are required to answer the following questions

1.1 In determining capital for computation of WACC will lease liability be included or excluded. Answer giving reasons.

1.2 Determine the total Capital for the purposes of WACC computation at book value and their respective percentage to total capital. Include as many components as possible from the information provided.

1.3 Compute the WACC for the company as on 31st March 22.

1.4 If the company were to increase its borrowing from banks by 10% of the total capital and use the same to reduce equity what will be the new WACC for the company. Assume that new debt is all raised as debentures at the same cost.