Beta Book Assignment

CORPORATE FINANCE (PGPEM) – 2024
INSTRUCTIONS ON BETA BOOK GROUP ASSIGNMENT
(Marks: 10 out of Total 200 for the course)
Due by 11:59 PM, 2nd December 2024
The objective of this assignment is (i) to familiarize you with the estimation of asset betas using actual
data from a company’s financial statements and from the stock market, and (ii) to get you acquainted
with using public data sources to get financial information on the firm. Instructions for the assignment
are given below.
1. You will receive an excel file that gives the industry sector and firms assigned to each group.
A set of three firms will be assigned to each participant of the group (Assigned Firms).
2. You would be conducting your analysis on the firms assigned to you. In the event, any of the
relevant information is missing for any of the assigned firms, please reach out to the TA.
3. For each firm you would be required to obtain its levered β using the following steps:
a. Go to https://finance.yahoo.com and type the firm name in the search bar.
b. You will find the name and ticker of the company in the drop-down search results.
Ticker is of the form ABCD.NS
c. Clicking on the company name will take you to the company information page.
d. The equity β of the firm ( β E ) and market capitalisation would be given in the
“Summary” section.
e. Record both the β E of the firm and its market capitalization. It is desirable that the
information for all the firms assigned to a group is obtained on the same date. Do
record this date for reference.
f. Save a snapshot of this page as backup material.
4. To obtain a measure of leverage of the firm you need to find out the market value of its
outstanding debt. We will assume that the market value of debt is equal to its book value and
obtain the book value from its latest full-year balance sheet.
a. Go to the “Financials” section on the company information page as mentioned in point
3c above and select “Balance Sheet”.
b. Use the “Balance Sheet” to calculate the total debt outstanding for the firm at the last
financial year-end. You can click on the “Total Liabilities Net Minority Interest” and
expand it to see all its components. You would need to add up components of
“Current Liabilities” and “Non-Current Liabilities” to arrive at total debt for the firm.
Treat any preference shares issued by the firm as debt. Save snapshots of the pages
of the financial statement from which you have taken any information and indicate
with a highlighter the information you have taken.
c. Calculate the leverage of the firm as D/E wherein the debt value and market
capitalisation are obtained in the previous steps.
5. If any of the required information is not available on https://finance.yahoo.com then you can
go to https://www.morningstar.in/default.aspx and follow similar steps as mentioned in 3 and
4 above. Please note the following while collecting data from Morningstar:
a. Search bar is located at the top left corner of the web page.
b. The equity β of the firm ( β E ) would be given in “Trading Information” section and
market capitalisation would be given in the “Overview” section.
c. When you view the “Balance Sheet” in the “Financials” section, you will be required to
click on “Expand Detail View” to get the full balance sheet.
6. For each firm, the β E measure needs to be unlevered to obtain a measure of the β of the
asset. Use the following formula to calculate the unlevered asset β A for each firm. Use a
corporate tax rate of 30%.
D
β E =β A [1+ ( 1−τ c ) ]
E
CORPORATE FINANCE (PGPEM) – 2024
7. At the end of the previous step, each member of the group would have the unlevered β ( β A )
for three firms from that sector. Combine your results across the group to obtain a table in the
below template. Calculate the average β A for your sector as the market cap. weighted
average across the firms in your group.
No. Firm Name Market Capitalization βE D/E βA
8. Your final report (1 for each group) should contain the following information:
a. Above table with rows for all the firms in the group
b. Are the β A of all firms in your group similar? If not, what could be a reason for
the divergence? (Not more than 300 words).
9. Attach the back-up information (screenshots from Yahoo finance regarding the financial
reports, market capitalisation etc.) as a zip file and submit it alongside your reports.

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CORPORATE FINANCE (PGPEM) – 2024

INSTRUCTIONS ON BETA BOOK GROUP ASSIGNMENT

(Marks: 10 out of Total 200 for the course)

Due by 11:59 PM, 2nd December 2024

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