Credit Suisse Investment Banking Pitch Book
CONFIDENTIAL
Solar Cost of Equity Analysis
CREDIT FIRST
SUISSE BOSTON
Assumptions
Tax Rate
Risk Free Rate (20 year)
Equity Risk Premium
Industry Statistics
SDS
ADP
FISV
DST
SEIC
CME
BSG
FDS
AX
18M
HPQ
ACN
EDS
CSC
ACS
Average
40.00%
4.72%
7.20%
Beta
1.04
0.89
7.4%
0.3%
8.0%
43.0%
0.4%
0.0%
1.62 22.0%
1.13
0.0%
1.47
0.1%
0.98
1.27
1.06
1.14
1.19
1.10
0.92
0.96
Debt /
Mkt Eg
1.28
1.15
16.0%
12.2%
5.0%
39.5%
27,0%
4,0%
12.3%
Cost of Equity
Cost of Equity
(1-tax rate) [debt/equity ratio)]
Levering
Factor M
Risk Free Rate+ Beta Equity Risk Premium
=4.72 % +1.07 7.2%
-12.4%
1.04
1.00
1.05
1.00
1.00
1.13
1,00
1.00
1.10
1.07
1.03
1.24
1.16
1.02
Unlevered
Beta
(1) Interpolated yield on the 20-year U.S. Treasury bond (3/15/05)
(2) The average historic spread between the return on stocks and it bonds (obotson Ass.)
(3) Bama U.S. Equity Beta Book predictions
(4) Levering Factor 1
(5) Unlevered Beta (Beta/Levering Factor)
(8) Cost of Equity Rt B(Rm Rf)+ Size Premium
0.99
0.89
0.88
0.76
1.27
1.15
1.43
1.13
1.46
0.90
1.18
1.03
0.92
1.03
1.08
1.07
Cost of
Equity
11.9%
11.1%
11.0%
10.2%
13.9%
13.0%
15.0%
12.8%
15.3%
11.2%
13.2%
12.1%
11.4%
12.1%
12.5%
12.4%
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