This document provides details on calculating the weighted average cost of capital (WACC) for Larsen & Toubro over a ten-year period from 2004-2013. It includes the amounts, weights, and after-tax costs of components used to calculate WACC using both book value and market value weights each year. The components included are equity, retained earnings, debt, and term loans. Formulas and tax rates used in the calculations are also provided. The document contains tables showing the detailed calculations of WACC for each year.

1. BATCH F1
2013
LARSEN & TOUBRO
CORPORATEFINANCE ASSIGNMENT
GROUP 5
I T M B - S C H O O L K H A R G H A R

2. LARSEN & TOUBRO
L & T Page 2
Index
CONTENT PAGE
ASSIGNMENT 2
ABOUT COMPANY 3
CAPM,PAYOUT RATIO 4
TEN YEAR WACC ON BOOK VALUE 5-7
TEN YEAR WACC ON MARKET VALUE 7-9
TEN YEAR WACC(BV) VS WACC(MV) 10
GROWTH RATE,DPS,EPS 11
EQUITYVS DEBT & COST OF EQUITY 12
APPENDIX 13-14

3. LARSEN & TOUBRO
L & T Page 3
ASSIGNMENT
Each group has to collect the following data for the past 10 years for a listed company included
in the Sensex
(i) EPS; (ii) DPS; (iii) Book Value per share; (iv) Market value per share (average of high and
low during a year).
From the data calculate growth rates and payout ratio. Using Dividend Growth model, determine
the firm's Cost of Equity. From the BSE or NSE or from any other source, ascertain the
company's latest Beta and calculate the Cost of Equity using CAPM.
Further, collect information about the company's debt and interest rate and calculate the weighted
average cost of capital using book value & market value weights. Use current audited Financial
Statements.
Group 5-
Pratim Roy

4. LARSEN & TOUBRO
L & T Page 4
Name of the company is “Larsen& Toubro”
Larsen & Toubro Limited, also known as L&T, is an Indian multinational conglomerate headquartered in Mumbai
India.The company has business interests in engineering, construction,manufacturing goods,information
technology and financial services.
L&T is India's largest engineering and construction company. Considered to be the "bellwether” of India's
engineering & construction sector",L&T was recognized as the Company of the year in Economic Times 2010
awards.
L&T has delivered Engineering, Procurement and Construction (EPC) services for many projects in the upstream
hydrocarbon sectorover the last two decades,in India Middle East, Africa South-East Asia and Australia.
L&T has formed a joint venture with Sapura Crest Petroleum Berhad, Malaysia for providing services to offshore
construction industry worldwide .The joint venture will own and operate the LTS 3000, a Heavy Lift cum Pipelay
Vessel.
L&T Power has set up an organization focused on coal-based, gas-based and nuclear power projects.L&T has
formed two joint ventures with MitsubishiHeavy Industries Japan to manufacture super critical boilers and steam
turbine generators.
L&T is among the top five fabrication companies in the world. L&T has a shipyard capable of constructing vessels
of up to 150 meters long and displacement of 20,000 tons at its heavy engineering complex at Hazira. The shipyard
is geared up to take up construction ofniche vessels such as specialized Heavy lift Cargo Vessels, CNG carriers,
Chemical tankers, defense & para military vessels,submarines and other role specific vessels.
The design wing of L&T ECC is called EDRC (Engineering Design and Research Centre). EDRC provides
consultancy,design and total engineering solutions to customers.It carries out basic and detailed design for both
residential and commercial projects.

5. LARSEN & TOUBRO
L & T Page 5
CAPM OF L&T
CAPM RATE
R(f) 8.65
Beta 1.45
R(m)-R(f) 3.27
Cost of
equity(CAPM) 13.3915
K= Rϝ+β(Rм-Rϝ)
Where Rϝ= Risk free Rate, Rм=MarketReturn, β= systematic risk
Rϝ= Current Rate of return on 10 year TreasuryBill=8.65%
Rм= 11.65%=MarketReturn
β=1.45 (as per BSE)
Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Payout
Ratio
0.231
83
0.2267
42
0.2230
43
0.1720
34
0.1766
19
0.2286
48
0.2624
67
0.2986
29
0.363
18
1.8682
86
0
0.5
1
1.5
2
Year 2013 2012 2011 2010 2009 2008 2007 2006 2005
Payout Ratio
Payout Ratio

6. LARSEN & TOUBRO
L & T Page 6
LAST TEN YEARS FROM 2013 TO 2004 WACC ON BOOK VALUE:
WACC(2013)(BV) Amt(CR.) WT AVG After Tax COC
Tax rate(26.83%)
Euity share 63.71 0.012324 0.141442 0.001743109
Retained earnings 3838.71 0.742546 0.141442 0.105027328
debt(9.15%) 33.23 0.006428 0.066795 0.000429351
Term loan(16.63%+ 2.5%) 1234.01 0.238702 0.1396 0.033322848
total 5169.66 1 0.140522637
COST OF CAPITAL 14.05%
WACC(2012)(BV) Amt(CR.) wt AVG after tax COC
Tax rate(29.38%)
Euity share 57.6 0.011516 0.156773 0.001805437
debt(9.15%) 40.4184 0.008081 0.0642 0.000518802
Retained earnings 3450.28 0.68983 0.156773 0.108146932
Term loan(16.63%+ 2.5%) 1453.34 0.290573 0.1342 0.038994868
total 5001.638 1 0.149466039
COST OF CAPITAL 13.77%
WACC(2011)(BV) Amt(CR.) WT AVG. After Tax COC
Tax rate(32.93)
Euity share 39.44 0.009374 0.17309 0.001622576
debt(9.15%) 35.3133 0.008393 0.0613 0.00051451
Retained earnings 3069.52 0.729568 0.17309 0.126281187
Term loan(16.63%+ 2.5%) 1063.04 0.252665 0.1283 0.032416895
Total 4207.313 1 0.160835168
COST OF CAPITAL 14.45%
WACC(2010)(BV) Amt(CR.) WT AVG After Tax COC
Tax rate(32.93)
Euity share 33.52 0.007217 0.201949 0.001457511
debt(9.15%) 44.5628 0.009595 0.0659 0.000632302
Retained earnings 3610.63 0.777409 0.201949 0.156996757
Term loan(16.63%+ 2.5%) 955.73 0.205779 0.137 0.028191759
Total 4644.443 1 0.187278327

7. LARSEN & TOUBRO
L & T Page 7
WACC(2009)(BV) Amt(CR.) WT AVG After Tax COC
Tax rate(31.25)
Euity share 55.18 0.013496 -0.35905 -0.00484596
debt(9.15%) 62.0842 0.015185 0.0629 0.000955145
Retained earnings 2868.84 0.701688 -0.35905 -0.25194443
Term loan(16.63%+ 2.5%) 1102.38 0.26963 0.129 0.034782333
Total 4088.484 1 -0.22105291
WACC(2008)(BV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Euity share 17.52 0.001784 0.324469 0.00057895
debt(9.15%) 22.2186 0.002263 0.064 0.000144821
Retained earnings 9470.71 0.964531 0.324469 0.312960443
Term loan(16.63%+ 2.5%) 308.53 0.031422 0.1339 0.004207379
Total 9818.979 1 0.317891593
COST OF CAPITAL -3.50%
WACC(2007)(BV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Equity share 21.164 0.003545 -0.38512 -0.0013651
Debt(9.15%) 20.394 0.003416 0.064 0.0002186
Retained earnings 5683.85 0.95194 -0.38512 -0.36661511
Term loan(16.63%+ 2.5%) 245.4 0.0411 0.1339 0.005503285
Total 5970.808 1 -0.36225833
COST OF CAPITAL 32.30%
WACC(2006)(BV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Euity share 22.634 0.004455 -0.14601 -0.00065048
debt(9.15%) 8.7936 0.001731 0.064 0.000110776
Retained earnings 4583.22 0.902131 -0.14601 -0.13171741
Term loan(16.63%+ 2.5%) 465.79 0.091683 0.1339 0.01227636
Total 5080.438 1 -0.11998075
COST OF CAPITAL -31%

8. LARSEN & TOUBRO
L & T Page 8
WACC(2005)(BV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Equity share 40.046 0.009625 -0.49127 -0.00472857
debt(9.15%) 14.5488 0.003497 0.064 0.000223797
Retained earnings 3312.25 0.796106 -0.49127 -0.39110539
Term loan(16.63%+ 2.5%) 793.72 0.190772 0.1339 0.025544394
Total 4160.565 1 -0.37006577
COST OF CAPITAL -0.2%
WACC(2004)(BV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Equity share 57.008 0.014878 0.891514 0.013263769
debt(9.15%) 11.9424 0.003117 0.064 0.000199469
Retained earnings 2717.55 0.709219 0.891514 0.632278905
Term loan(16.63%+ 2.5%) 1045.25 0.272787 0.1339 0.03652612
Total 3831.75 1 0.682268262
COST OF CAPITAL 68.20%
LAST TEN YEARS FROM 20013 TO 2004 WACC ON MARKET VALUE:
WACC(2013)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(26.83%)
Euity share 123.08 0.088526 0.141442 0.012521352
debt(9.15%) 33.2316 0.023902 0.066795 0.00159654
Term loan(16.63%+ 2.5%) 1234.01 0.887572 0.1396 0.123904999
Total 1390.322 1 0.138022891
COST OF CAPITAL 13.80%
WACC(2012)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(29.38%)
Euity share 122.48 0.075781 0.156773 0.011880423
debt(9.15%) 40.4184 0.025008 0.0642 0.001605494
Term loan(16.63%+ 2.5%) 1453.34 0.899211 0.1342 0.12067417
Total 1616.238 1 0.134160088
COST OF CAPITAL 13.30%

9. LARSEN & TOUBRO
L & T Page 9
WACC(2011)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(32.93%)
Euity share 121.77 0.099801 0.17309 0.017274665
debt(9.15%) 35.3133 0.028942 0.0613 0.001774169
Term loan(16.63%+ 2.5%) 1063.04 0.871256 0.1283 0.111782172
Total 1220.123 1 0.130831005
COST OF CAPITAL 12.90%
WACC(2010)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(27.90)
Euity share 120.44 0.107465 0.201949 0.021702511
debt(9.15%) 44.5628 0.039762 0.0659 0.002620329
Term loan(16.63%+ 2.5%) 955.73 0.852772 0.137 0.116829819
Total 1120.733 1 0.141152658
COST OF CAPITAL 13.80%
WACC(2009)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(31.25)
Euity share 117.14 0.091401 -0.35905 -0.032818
debt(9.15%) 62.0842 0.048443 0.0629 0.003047038
Term loan(16.63%+ 2.5%) 1102.38 0.860156 0.129 0.11096017
Total 1281.604 1 0.081189212
COST OF CAPITAL 13.40%
WACC(2008)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Euity share 58.47 0.150224 0.324469 0.048743053
debt(9.15%) 22.2186 0.057085 0.064 0.003653449
Term loan(16.63%+ 2.5%) 308.53 0.792691 0.1339 0.106141297
Total 389.2186 1 0.1585378
COST OF CAPITAL 5.50%

10. LARSEN & TOUBRO
L & T Page 10
WACC(2007)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Euity share 56.65 0.175689 -0.38512 -0.06766226
debt(9.15%) 20.394 0.063248 0.064 0.004047884
Term loan(16.63%+ 2.5%) 245.4 0.761062 0.1339 0.101906253
Total 322.444 1 0.038291882
COST OF CAPITAL 16.40%
WACC(2006)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Euity share 27.48 0.054734 -0.14601 -0.00799156
debt(9.15%) 8.7936 0.017515 0.064 0.001120954
Term loan(16.63%+ 2.5%) 465.79 0.927751 0.1339 0.124225857
Total 502.0636 1 0.117355251
COST OF CAPITAL 10.60%
WACC(2005)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Euity share 25.98 0.031142 -0.49127 -0.01529912
debt(9.15%) 14.5488 0.017439 0.064 0.001116122
Term loan(16.63%+ 2.5%) 793.72 0.951419 0.1339 0.127394979
Total 834.2488 1 0.113211977
COST OF CAPITAL 12.80%
WACC(2004)(MV) Amt(CR.) WT AVG After Tax COC
Tax rate(30%)
Euity share 24.88 0.022993 0.891514 0.020498516
debt(9.15%) 11.9424 0.011037 0.064 0.000706342
Term loan(16.63%+ 2.5%) 1045.25 0.96597 0.1339 0.129343448
Total 1082.072 1 0.150548306
COST OF CAPITAL 15.05%

11. LARSEN & TOUBRO
L & T Page 11
LAST TEN YEARS RECORD WACC(BV)VS WACC(MV)
YEAR WACC(BV) WACC(MV)
2013 14.050% 13.800%
2012 13.770% 13.300%
2011 14.450% 12.900%
2010 16.330% 13.800%
2009 18.860% 13.400%
2008 -3.500% 5.500%
2007 32.300% 16.400%
2006 -31.000% 10.600%
2005 -0.200% 12.800%
2004 68.200% 15.050%
-40.000%
-20.000%
0.000%
20.000%
40.000%
60.000%
80.000%
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
WACC(BV) VS WACC(MV)
WACC(BV) WACC(MV)

12. LARSEN & TOUBRO
L & T Page 12
Praticula
r
Mar
'13
Mar
'12
Mar
'11 Mar '10
Mar'0
9
Mar
'08
Mar
'07
Mar
'06
Mar
'05
Mar'
04
Growth
rate
0.1212
12
0.1379
31 0.16
0.19047
619
-
0.3823
5
0.30769
2
-
0.4090
9 -0.2
-
0.6562
5 0.06
YEAR WISE DPS AND EPS FOR LAST TEN YEARS
Year
201
3 2012 2011 2010 2009 2008 2007 2006 2005 2004
Dividend Per
Share 18.5 16.5 14.5 12.5 10.5 17 13 22 27.5 80
Earnings Per
Share 79.8
72.7
7
65.0
1
72.6
6 59.45
74.3
5
49.5
3
73.6
7
75.7
2
42.8
2
-1
-0.5
0
0.5
Mar '13 Mar '12 Mar '11 Mar '10 Mar'09 Mar '08 Mar '07 Mar '06 Mar '05 Mar'04
Growth rate
Series1
0
20
40
60
80
100
120
140
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
DPS VS EPS
Dividend Per Share Earnings Per Share

13. LARSEN & TOUBRO
L & T Page 13
LAST TEN YEAR EQUITY CAP VS DEBT:
Year 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Equity Share
Capital
123.
08
122.4
8
121.7
7
120.4
4
117.1
4 58.47 56.65 27.48 25.98 24.88
Debt
2477
60
24642
9.8
24487
9.5
24208
4.4
23533
4.3
11740
7.8
11369
6.6
55124
.88
5208
9.9
49859
.52
0
500
1000
1500
2000
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Equity cap vs Debt
Book Value Market value
-1
-0.5
0
0.5
1
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Cost of Equity(k)
Cost of Equity(k)
YEAR 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Cost of
Equity(k)
0.141
442
0.156
773
0.17
309
0.20194
8817
-
0.359
05
0.324
469
-
0.385
12
-
0.14600
697
-
0.491273
097
0.891
514

14. LARSEN & TOUBRO
L & T Page 14
ANNEXURE
Sources Of
Funds 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Total Share
Capital
123.0
8
122.4
8
121.7
7
120.4
4
117.1
4 58.47 56.65 27.48 25.98 24.88
Equity Share
Capital
123.0
8
122.4
8
121.7
7
120.4
4
117.1
4 58.47 56.65 27.48 25.98 24.88
Share
Application
Money 0 0 0 25.09 0 0 0 0 0 0
Preference Share
Capital 0 0 0 0 0 0 0 0 0 0
Reserves
29,01
9.64
25,10
0.54
21,72
4.49
18,14
2.82
12,31
7.96
9,470.
71
5,683
.85
4,583
.32
3,312
.25
2,717
.55
Revaluation
Reserves 0 0 0 23.29 24.59 25.9 27.93 29.37 30.9 32.61
Networth
29,14
2.72
25,22
3.02
21,84
6.26
18,31
1.64
12,45
9.69
9,555.
08
5,768
.43
4,640
.17
3,369
.13
2,775
.04
Secured Loans
1,234.
01
1,453.
34
1,063.
04
955.7
3
1,102.
38
308.5
3 245.4
465.7
9
793.7
2
1,045
.25
Unsecured Loans
6,771.
55
6,813.
44
5,268.
54
5,845.
10
5,453.
65
3,275.
46
1,832
.35
987.7
8
1,065
.34 279.1
Total Debt
8,005.
56
8,266.
78
6,331.
58
6,800.
83
6,556.
03
3,583.
99
2,077
.75
1,453
.57
1,859
.06
1,324
.35
Total Liabilities
37,14
8.28
33,48
9.80
28,17
7.84
25,11
2.47
19,01
5.72
13,13
9.07
7,846
.18
6,093
.74
5,228
.19
4,099
.39

15. LARSEN & TOUBRO
L & T Page 15
Particular 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Earnings Per
Share 79.8 72.77 65.01 72.66 59.45 74.35 49.53 73.67 75.72 42.82
Face Value 2 2 2 2 2 2 2 2 2 10
Book Value
473.5
7
411.8
7
358.8
1 303.28
212.3
2
325.9
8
202.6
5 335.61 256.94
220.4
5
Equity Share
Capital
123.0
8
122.4
8
121.7
7 120.44
117.1
4 58.47 56.65 27.48 25.98 24.88
Dividend Per
Share 18.5 16.5 14.5 12.5 10.5 17 13 22 27.5 80
Market value
914.4
8
875.6
9
1107.
68 1089.55
450.6
8
1013.
31
542.4
2 407.46 166.69 96.21
Growth rate
0.121
212
0.137
931 0.16
0.19047
619
-
0.382
35
0.307
692
-
0.409
09 -0.2
-
0.65625 0.06
Payout ratio
0.231
83
0.226
742
0.223
043
0.17203
4132
0.176
619
0.228
648
0.262
467
0.29862
902
0.36318
0137
1.868
286
Cost of
Equity(k)
0.141
442
0.156
773
0.173
09
0.20194
8817
-
0.359
05
0.324
469
-
0.385
12
-
0.14600
697
-
0.49127
3097
0.891
514
Debt Equity
Ratio 0.27 0.33 0.29 0.37 0.53 0.38 0.36 0.32 0.56 0.48
Debt
33.23
16
40.41
84
35.31
33 44.5628
62.08
42
22.21
86
20.39
4 8.7936 14.5488
11.94
24
K(e)=(P/MAKET VALUE+G)
K(d)=INT(1-T)
K(t)-INT(1-T)
GROWTHRATE={(DIV1/DIV0)-1}
PAYOUT RATIO=DPS/EPS
DPS=DIVIDENDPER SHARE
EPS=EQUITYPER SHARE

16. LARSEN & TOUBRO
L & T Page 16
Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09
Income
Operatingincome 60,873.26 53,170.52 43,905.87 36,870.19 33,856.54
Expenses
Material consumed 14,111.59 13,594.21 10,675.37 10,016.52 9,211.27
Manufacturingexpenses 33,840.81 27,425.97 22,792.80 17,247.39 16,115.56
Personnel expenses 4,436.32 3,663.45 2,830.08 2,379.14 1,998.02
Sellingexpenses - - - 306.22 312.1
Adminstrativeexpenses 2,077.48 2,204.28 1,968.05 1,873.59 2,102.05
Expenses capitalised - - - -36.25 -24.48
Cost of sales 54,466.20 46,887.91 38,266.30 31,786.61 29,714.52
Operatingprofit 6,407.06 6,282.61 5,639.57 5,083.58 4,142.02
Otherrecurringincome 1,850.90 1,338.28 1,147.46 974.59 748.8
AdjustedPBDIT 8,257.96 7,620.89 6,787.03 6,058.17 4,890.82
Financial expenses 982.4 666.1 619.25 995.37 770
Depreciation 818.47 699.46 599.22 383.65 284.83
Otherwrite offs - - - 30.95 21.16
AdjustedPBT 6,457.09 6,255.33 5,568.56 4,648.20 3,814.83
Tax charges 1,800.50 1,853.83 1,943.58 1,577.02 1,176.19
AdjustedPAT 4,656.59 4,401.50 3,624.98 3,071.18 2,638.64
Nonrecurringitems 254.06 55 332.91 1,347.08 863.78
Othernon cash adjustments - - - -45.13 -21.09
Reportednetprofit 4,910.65 4,456.50 3,957.89 4,373.13 3,481.33
Earnigsbefore appropriation 5,063.04 4,562.18 4,065.18 4,473.63 3,585.64
Equitydividend 1,138.47 1,010.46 882.84 752.75 614.97
Preference dividend - - - - -
Dividendtax 85.86 101.44 112.82 110.25 101.83
Retainedearnings 3,838.71 3,450.28 3,069.52 3,610.63 2,868.84