1) From the data given below, you need to calculate the EPS for Vodafone and then

calculate it for the two years for which you have data.

ANS:-

Vodafone Consolidated 2002 2001

Profit and Loss Account
Profit for the financial period Rs. -16155.0 Rs. -9885.0
(£)
Weighted average number of 65012501146 61334032162
issued shares

EPS =-16155.0/65012501146 =-9885.0/61334032162

=£ -2.48 =£ -1.611

Big numbers for the profit and the shares but in the end, as we should expect by now, the EPS for
Vodafone is a disaster - negative and relatively large. For every share, ordinary shareholders have
lost 25 pence in 2002 and they lost 16 pence in 2001.

2) Take the latest prices for Vodafone's shares from either Yahoo or Reuters and rework
the dividend yield value for Vodafone.
ANS:-

4) Using the data given below find the relevant data for Vodafone and calculate its P/E
ratio.

ANS:-

Vodafone pence P/E ratio

Current market share price 181.70

84.51

EPS 2.15
5) Explain Capital Asset Pricing Model (CAPM) with formula and illustration.

ANS:-

The Capital Asset Pricing Model (CAPM) is the most popular model of the determination of
expected returns on securities and other financial assets. It is considered to be an "asset pricing"
model since, for a given exogenous expected payoff, the asset price can be backed out once the
expected return is determined. Additionally, the expected return derived within the CAPM or any
other asset pricing model may be used to discount future cash flows. These discounted cash flows
then are added to determine an asset's price. So, even though the focus is on expected return, we
will continue to refer to the CAPM as an asset pricing model.
(a) Intrinsic value on the basis of book values of Assets and Liabilities including goodwill

Intrinsic value per share on the Rs. in lakhs Rs. in lakhs

basis of book values
Goodwill 420
Other Fixed Assets 11,166
Current Assets 2,910
Loans and Advances 933
15,429
Less: Secured loans 4,500
Current liabilities 1,242
Provisions 960 6,702
8,727
Add: Notional call on 90 lakhs 180
equity shares @ Rs. 2 per share
8,907

Value per equivalent share of Rs.10 each= Rs.8,907 lakhs/ 345 lakhs shares= Rs. 25.82 (approx)
Hence, intrinsic values of each equity share are as follows:
Value of fully paid-up share of Rs. 10 = Rs. 25.82
Value of partly paid-up share of Rs. 8 = Rs. 25.82 – Rs. 2 = Rs. 23.82
Value of fully paid-up share of Rs. 5 = Rs. 25.82*5/10= Rs. 12.91

Calculation of equivalent number of equity shares of Rs. 10 each:

Shares in lakhs

Fully paid shares of Rs. 10 each 180

Partly-paid shares after notional call 90
Fully paid shares of Rs. 5 each (Rs. 150 lakhs/Rs. 10 =Rs. 5) 75
--------------------
345

(b) Value per share on dividend yield basis:

Value of fully paid-up share of Rs. 10= 20/15* Rs. 10=Rs. 13.33(approx)

Value of partly paid-up share of Rs. 8 =20/15*Rs. 8=Rs. 10.67(approx)

Value of fully paid-up share of Rs. 5=20/15*Rs.5 = Rs. 6.67(approx)

(c) Value per share on the basis of EPS:

Profit after tax = Rs. 1,371 lakhs

Total share capital = Rs. (1,800 + 720 + 750) lakhs = Rs. 3,270 lakhs

Earning per rupee of share capital =1,371 lakhs/3,270 lakhs=Rs. 0.419 (approx)

Earning per fully paid share of Rs. 10 = Rs. 0.419 * 10 = Rs. 4.19

Earning per share of Rs. 10 each, Rs. 8 paid-up = Re. 0.419 * 8 = Rs. 3.35 (approx)

Earning per share of Rs. 5, fully paid-up = Re. 0.419 * 5 = Rs. 2.10 (approx)

Value of fully paid share of Rs. 10 =4.19/2* 10=Rs. 20.95

Value of share of Rs. 10, Rs. 8 paid-up =3.35/2* 10=Rs. 16.75

Value of fully paid share of Rs. 5 = Rs. 2.10/2* 10=Rs. 10.50