Given data in Qs : i) PAT - 4000 Cr ii) Tangible Fixed Assets -3300 Cr iii) Depreciation 8

Caluculating weighted average cost of capital:

We know cost of equity using CAPM formula is,

= Risk free rate + beta( risk premium)

We know riks premium = market return- risk free rate

From the given values

0.05 = 0.10-risk free rate

Riks free rate = 0.05

And beta is given as 2

So cost of equity = 0.05+ 2(0.05)

= 0.15 or 15%

And cost of debt given as 9%

Weighted average cost of capital is,

= Cost of equity* weight of equity+ cost of debt (1-tax rate)* weight of debt

= 0.15*2/5 + 0.09(1-0.20)*3/5

= 0.1032 or 10.32%

It is given that normal rate of return on tangible assets = WACC + 0.25* cost of debt*(1-tax rate)

= 0.1032+ 0.25*0.09*(1-0.20)

= 0.1212 or 12.12%

Profit after tax (PAT) = 4000 cr

(-) profit allocated to tangible fixed assets = tangible fixed assets* normal return expected

= 3300 * 12.12%

= 399.96 cr

Profit allocated to intangible assets including brand = 4000-399.96 = 3600.04 cr

It is given capitalisation rate for intangibles is 22%

So capitalised value of intangibles including brand. = 3600.04/22%

= 16363.8182cr

(-) value of identifiable intangibles other than brand = 1200 cr

Value of brand = 16363.8182-1200 = 15163.8182cr