12. Risk Measures: The beta for Telecom is 0.79, calculated using weekly returns over the last 2 years and against the S&P 500 Index and 0.95 against the MSCI Global Index (see exhibit 5). Telecom currently gets about 56% of its revenues from smartphonesl'tablets, 25% from computers and 19% from retail. The details of the beta calculation are included in Exhibit 5. as well as bottom up beta estimates for each of the three businesses of Telecom. The current stock price for the firm is R 128.85Ishare and there are 5,824.5 million shares outstanding. 13. Debt Choices: Telecom expects to finance the T-car division using the same mix of debt and equity (in market value terms) as it is using currently in the rest of its business. Telecom's currently has R364 billion in book value of interest-bearing debt (with a weighted average maturity of 5 years) and it reports the following lease commitments for the future: Year Lease commitment 2015 R 662 million 2016 R 676 million 2017 R 645 million 2018 R 593 million 2019 R 534 million Beyond R 1,877 million The lease payment for the most recent year is R717 million. Telecom was rated AA+ and the default spread for companies with that rating is 0.50%. 14. Taxes: Telecom's effective tax rate is 26%. but its marginal tax rate is 40%. 15. Macro data: The current longterm US Treasury bond rate is 2.0%, and the expected inflation rate is 1.5%. 16. Other information: You have collected information on other automobile companies in Exhibit 6. The data includes the regression betas of these companies and relevant information on both market values of debt, equity and cash. You can assume a 40% marginal tax rate for these firms. as well. (You can also assume that the debt includes the present value of operating leases). Questions on the Project 1. Accounting Return Analysis - Estimate the operating income from the proposed T-car investment to Telecom over the next 10 years. - Estimate the after-tax return on capital for the investment over the 10-year period. - Based upon the aftertax return on capital, would you accept or reject this project? This will require you to make some assumptions about allocation and expensing. I'U'IaI unllr aeellmnfinne at: Pnneicfnnf ac unll Pan and nelimsrl'n tho rnhlrn nn Panital