Steps followed to complete the assignment

1. Collection of data for Cipla from yahoo finance website for the time period 1
November 2013 to 31 October 2014 in an excel sheet. The adjusted closing prices are used.

2. The returns are calculated

1. ( (Current day previous day)/previous day) * 100 for daily returns
2. ( (Current Friday previous Friday)/previous Friday) * 100 for weekly
returns.

3. Collection of data for Sensex from yahoo finance website for the time period 1 November
2013 to 31 October 2014 in an excel sheet. The adjusted closing prices are used.

4. The returns are calculated

( (Current day previous day)/previous day) * 100 for daily returns
( (Current Friday previous Friday)/previous Friday) * 100 for weekly returns.

5. E is calculated as
E = COV(Market returns, Stock returns)/VAR(Market returns)
Note: They covariance and variances are calculated using excel functions. Also, dates for
which the stock data corresponding to market data is missing, are removed.

6. The debt to Equity ratio is taken from the latest annual report and is found by the formula
Long term Debt/Equity

7. asset of the company is given by

asset = E * (1 /(1 + (1-t)D/E)
1. D/E is got from step 6.
2. t is government tax rate which is 33.99 percent.
8. The government tax rate is 8.22% obtained from RBI site (364 day T bill:
http://www.rbi.org.in/home.aspx).

9. Market premium is given by

Market premium= market returns - risk free rate
Market return = 100 * (Sensex at 31 Oct 2014 - Sensex at 1 Nov 2013)
____________________________________
Sensex at 1 Nov 2013
risk free rate = 364 day T bill rate step 8

10. The weighted average cost of capital is given as

WACC= (1-t)*rd*D/V+re*E/V
rd (companys cost of debt) 12%
re(cost of equity) 15.41
cost of capital 15.11