Numbers and Narratives: A Simple Discounted Cash Flow (DCF) Model for Equity Valuation

[dineshssairam]

Some time back, I calculated the Cost of Capital of Reliance Industries from scratch and posted it in a different thread. Hope this helps you.

Valuation of stock

I would say RoCE / RoIC should be higher than the Cost of Capital (Or RoE should be higher than the Cost of Equity), as RoE alone can be artificially inflated by the use of excessive Debt. Besides, Debt itself is a form of Capital, so it makes no sense to exclude it from a calculation of Cost of Capital. Cost of Capital Anyway, the Cost of Capital for a company is quite simply the total implied interest on the means of financing it is currently using. Imagine that a company is running entire…