CHAPTER NO - Information and Library Network Centreshodhganga.inflibnet.ac.in/bitstream/10603/70695/16/16_chapter 8.pdf · CAPITAL VIS-À-VIS COST OF CAPITAL, EARNING PER SHARE AND

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CHAPTER NO – 8 CAPITAL VIS-À-VIS COST OF CAPITAL, EARNING PER

SHARE AND FIRM VALUATION

8.1 THE RELATIONSHIP BETWEEN COST OF CAPITAL, LEVERAGE ,

EARNING PER SHARE AND VALUATION OF FIRM.

A change in capital structure influence the weighted average cost of capital and

thereby

The earnings of the firm. Capital structure affects investment decisions and thereby

earning and operating income. Financial leverage magnifies effect on EPS available to

shareholders as well as valuation of firm.

8.2 CAPITAL STRUCTURE

The term capital structure is used to represent the proportionate relationship between

debt and equity. The various means of financing represent the financial structure of an

enterprise. The left-hand side of the balance sheet (liabilities plus equity) represents

the financial structure of a company. Traditionally, short-term borrowings are

excluded from the list of methods of financing the firm’s capital expenditure.

8.3 FINANCIAL LEVERAGE

The use of the fixed-charges sources of funds, such as debt and preference capital

along with the owners’ equity in the capital structure, is described as financial

leverage or gearing or trading on equity.

The financial leverage employed by a company is intended to earn more return on the

fixed-charge funds than their costs. The surplus (or deficit) will increase (or decrease)

the return on the owners’ equity. The rate of return on the owners’ equity is levered

above or below the rate of return on total assets.

8.3.1 Financial Leverage and the Shareholders’ Return

The primary motive of a company in using financial leverage is to magnify the

shareholders’ return under favourable economic conditions. The role of financial

leverage in magnifying the return of the shareholders’ is based on the assumptions

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that the fixed-charges funds (such as the loan from financial institutions and banks or

debentures) can be obtained at a cost lower than the firm’s rate of return on net assets

(RONA or ROI).

8.4 OPERATING LEVERAGE

Operating leverage affects a firm’s operating profit (EBIT). The degree of operating

leverage (DOL) is defined as the percentage change in the earnings before interest and

taxes relative to a given percentage change in sales.

8.5 COMBINING FINANCIAL AND OPERATING LEVERAGE

Operating leverage affects a firm’s operating profit (EBIT), while financial leverage

affects profit after tax or the earnings per share. The degrees of operating and

financial leverages is combined to see the effect of total leverage on EPS associated

with a given change in sales.

Combining Financial and Operating Leverages

The degree of combined leverage (DCL) is given by the following equation:

The ultimate goal of a firm is to maximize the wealth of the shareholders. So that, the

firm should select such a capital structure that maximize the value of equity shares

and minimize the company’s cost of capital. There is also a view point which strongly

supports the close relationship between the financial leverage and value of the firm.

Financial leverage also increase the financial risk, define as the risk of possible

insolvency arising out of inadequacy of cash as well as the variability in the earning

available to shareholders. There is a group of peoples which strongly believes that

combination of debt and equity has no impact on the shareholders wealth and the

decision on financial structure is irreverent. In this chapter, the relationship of cost of

capital and leverage, cost of capital and EPS, cost of capital and valuation of firm,

% C hange in E B ITD O L

% C hange in Sales

E B IT /E B ITD O L

Sales/Sales

=

∆=∆

% Change in EBIT % Change in EPS % Change in EPS

% Change in Sales % Change in EBIT % Change in Sales= × =

291

valuation of firm and EPS, valuation of firm and Leverage as well as leverage and

EPS where tested using Karl person’s coefficient of correlation and t – test.

Hypothesis Testing

Ho: There is no correlation between cost of capital and EPS for all sampled

companies

H1: There is correlation between cost of capital and EPS for all sampled companies

Table No. 8.1 Operating Leverage – Automobile companies

Sr. No. Name of Companies 2009 2010 2011 2012 2013

Average companywise

1 Ashok Leyland Ltd. 3.11 2.43 1.03 -0.36 3.4 1.922 2 Bajaj Auto Ltd. 6.12 2.23 1.49 -0.46 2.19 2.314 3 Hero Motorcorp Ltd. 1.29 1.7 -0.91 0.91 -17.06 -2.814 4 Mahindra & Mahindra

Ltd. -2.33 2.06 0.79 0.18 0.88 0.316

5 Maruti Suzuki India Ltd. -3.93 1.76 -0.76 14.62 1.68 2.674 6 Tata Motors Ltd. 5.32 1.97 -0.57 -3 2.99 1.342 7 TVS Motors 4.15 2.32 1.72 1.19 -189.99 -36.122 Average yearwise 1.96 2.07 0.4 1.87 -27.99 -4.34 Source: Ace Analyser Database

On the basis of above table we can say that average operating leverage of all sampled

companies of automobile industry is -4.34. Among the selected company worst

operating leverage is that of TVS motors which is -36.122 followed by Hero

motorcorp which also have negative average operating leverage. The highest

operating leverage among the selected companies is of Maruti Suzuki (2.67) followed

by Bajaj Auto (2.31).

Hypothesis Testing

H0: There is no significant difference in Operating leverage among the selected

companies of Automobile industry

H1: There is significant difference in Operating leverage among the selected


Table No. 8.2 ANOVA: Operating Leverage – Automobile

SUMMARY

Groups Count Sum Average Variance

Ashok Leyland Ltd. 5 9.61 1.922 2.46427

Bajaj Auto Ltd. 5 11.57 2.314 5.72053

Hero Motorcorp Ltd. 5 -14.07 -2.814 64.41523

Mahindra & Mahindra Ltd. 5 1.58 0.316 2.65103

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Maruti Suzuki India Ltd. 5 13.37 2.674 49.98388

Tata Motors Ltd. 5 6.71 1.342 10.36087

TVS Motors 5 -180.61 -36.122 7399.796

ANOVA

Source of Variation SS df MS F P-value F crit

Between Groups 5995.361 6 999.2268 0.928231 0.49011 2.445259

Within Groups 30141.57 28 1076.485

Total 36136.93 34

α=0.05;

Here,

Fcal. = 0.928 < Fcrit. =2.445

Hence we will fail to reject null hypothesis. Therefore we can say that there is no

significant difference in operating leverage among the selected companies of

Automobile industry

Table No. 8.3 Operating Leverage – Steel companies


Average companywise

1 Bhusan Steel Ltd. 1.11 3.33 1.3 0.83 0.48 1.41 2 Essar Steel India Ltd. -6.23 1.11 -1.39 -1.73 -16.21 -4.89 3 Jindal Steel and

Power Ltd. 3.02 0.03 0.76 0.32 -0.42 0.742

4 JSW Ispat Steel Ltd 267.93 4.07 -8.3 -212.94

12.69 5 JSW Steel Ltd -5.25 2.57 -0.11 -0.39 2.36 -0.164 6 SAIL -2.49 -1.41 -8.5 -4.56 11.85 -1.022 7 Tata Steel Ltd. 0.48 1.01 1.43 0.17 -1.91 0.236

Average yearwise 36.94 1.53 -2.12 -31.19 -0.64 1.29 Source: Ace Analyser Database

On the basis of above table we can say that the average operating leverage of selected

companies of steel industry is 1.29. Among all the lowest operating leverage is hat of

Essar Steel which is -4.89 while the highest is that of JSW Ispat steel which Is 12.69

Hypothesis Testing

H0: There is no significant difference in Operating leverage among the selected

companies of steel industry

293

H1: There is significant difference in Operating leverage among the selected


Table No. 8.4 ANOVA: Operating Leverage – Steel Companies

Anova: Operating Leverage - Steel

SUMMARY


Bhusan Steel Ltd. 5 7.05 1.41 1.24745

Essar Steel India Ltd. 5 -24.45 -4.89 47.0434 Jindal Steel and Power Ltd. 5 3.71 0.742 1.80622

JSW Ispat Steel Ltd 4 50.76 12.69 38857.08

JSW Steel Ltd 5 -0.82 -0.164 9.94168

SAIL 5 -5.11 -1.022 59.10797

Tata Steel Ltd. 5 1.18 0.236 1.67348

ANOVA


Between Groups 751.3106 6 125.2184 0.028883 0.999876 2.459108

Within Groups 117054.5 27 4335.353

Total 117805.8 33

α=0.05;

Here,

Fcal. = 0.0288 < Fcrit. =2.380


significant difference in operating leverage among the selected companies of steel

industry

Table No. 8.5: Financial Leverage – Automobile Companies

Sr. No. Name of Companies 2009 2010 2011 2012 2013 Average companywise

1 Ashok Leyland Ltd. 1.23 1.63 0.92 12.02 2.26 3.612

2 Bajaj Auto Ltd. 0.93 1.09 -0.02 1.45 0.24 0.738

3 Hero Motorcorp Ltd. 1.23 1.26 0.93 1.21 0.91 1.108

4 Mahindra & Mahindra Ltd.

1.55 0.13 1.17 1.59 0.7 1.028

5 Maruti Suzuki India Ltd. 0.91 0.95 0.62 0.96 0.9 0.868

6 Tata Motors Ltd. 1.61 0.82 2.24 3.03 1.95 1.93

7 TVS Motors -0.02 3.14 0.09 1.69 1.26 1.232

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Average yearwise 1.06 1.29 0.85 3.14 1.17 1.5

Source: Ace Analyser Database

On the basis of above table we can say that average financial leverage of sample

automobile companies is 1.5. Among the selected companies highest financial

leverage is that of Ashok Leyland i.e. 3.61 followed by Tata motors (1.93). Rest of all

the companies have financial leverage which is lower than that of an industry average.

The lowest among all is of Bajaj Auto (0.74)

Hypothesis Testing

H0: There is no significant difference in financial leverage among the selected


H1: There is significant difference in financial leverage among the selected


Table No. 8.6 ANOVA: Financial Leverage - Automobiles

Anova: Financial Leverage - Automobiles

SUMMARY


Ashok Leyland Ltd. 5 18.06 3.612 22.34287

Bajaj Auto Ltd. 5 3.69 0.738 0.37257

Hero Motorcorp Ltd. 5 5.54 1.108 0.02982

Mahindra & Mahindra Ltd. 5 5.14 1.028 0.38062

Maruti Suzuki India Ltd. 5 4.34 0.868 0.01987

Tata Motors Ltd. 5 9.65 1.93 0.66025

TVS Motors 5 6.16 1.232 1.68067

ANOVA


Between Groups 30.36874 6 5.061456 1.390146 0.253184 2.445259

Within Groups 101.9467 28 3.640953

Total 132.3154 34

α=0.05;

Here,

Fcal. = 1.39 < Fcrit. =2.445

295


significant difference in financial leverage among the selected companies of

Automobile industry

Table No. 8.7 ANOVA: Financial Leverage – Steel Companies


Average company wise

1 Bhusan Steel Ltd. -0.03 1.49 -2.26 0.04 -3.83 -0.918 2 Essar Steel India Ltd. 1.65 9.54 75.05 -20.08 -0.27 13.178 3 Jindal Steel and Power

Ltd. 0.79 62.22 0.88 0.16 2.39 13.288

4 JSW Ispat Steel Ltd 24.92 -0.13 -0.89 0.85

6.1875 5 JSW Steel Ltd 1.52 2.5 7.11 2.01 0.38 2.704 6 SAIL 1.03 1.04 1.01 1.16 1.23 1.094 7 Tata Steel Ltd. 0.9 -6.55 1 -1.56 1.39 -0.964 Average year wise 4.4 10.02 11.7 -2.49 0.22 4.94 Source: Ace Analyser Database

On the basis of above table we can say that the average financial leverage of sampled

companies of steel industries is 4.94. Moreover among the selected companies highest

financial leverage is of Jindal steel (13.29) followed by Essar steel (13.18). The

lowest financial leverage is of Tata steel which is -0.964.

Hypothesis Testing

H0: There is no significant difference in financial leverage among the selected


H1: There is significant difference in financial leverage among the selected


Table No. 8.8 ANOVA: Financial Leverage –Steel

Anova: Financial Leverage –Steel SUMMARY

Groups Count Sum Average Variance Bhusan Steel Ltd. 5 -4.59 -0.918 4.44637 Essar Steel India Ltd. 5 65.89 13.178 1315.304 Jindal Steel and Power Ltd. 5 66.44 13.288 748.9025 JSW Ispat Steel Ltd 4 24.75 6.1875 156.4658 JSW Steel Ltd 5 13.52 2.704 6.68473 SAIL 5 5.47 1.094 0.00923 Tata Steel Ltd. 5 -4.82 -0.964 11.10793

ANOVA

Source of Variation SS df MS F P-value F crit Between Groups 1138.768 6 189.7947 0.581319 0.741938 2.459108 Within Groups 8815.218 27 326.4895

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Total 9953.986 33

α=0.05;

Here,

Fcal. = 0.581 < Fcrit. =2.459


significant difference in financial leverage among the selected companies of steel

industry

Table No. 8.9 Total Leverage – Automobile Industry

Sr. No.

Name of Companies 2009 2010 2011 2012 2013

Average companywise

1 Ashok Leyland Ltd. 2.57 5.73 0.96 -3.57 7.13 2.564 2 Bajaj Auto Ltd. 5.04 4.38 -0.05 -0.53 0.55 1.878

3 Hero Motorcorp Ltd. 1.69 2.65 -0.59 1.08 -13.66 -1.766 4 Mahindra & Mahindra

Ltd. -2.49 0.48 0.88 0.22 0.6 -0.062

5 Maruti Suzuki India Ltd. -2.11 2.48 -0.32 10.12 1.78 2.39 6 Tata Motors Ltd. 5.82 2.61 -0.84 -5.63 4.32 1.256 7 TVS Motors -0.15 9.71 0.24 2.06 -136.97 -25.022 Average yearwise 1.48 4.01 0.04 0.54 -19.46 -2.68


On the basis of above table we can say that average total leverage of sampled

companies of automobile industry is -2.68. Among the selected companies lowest

total leverage is that of TVS motors (-25.022) followed by Hero mortorcorp (-

1.77).While highest total leverage is that of Ashok Leyland (2.56) followed by Maruti

Suzuki (2.39)

Hypothesis Testing

H0: There is no significant difference in total leverage among the selected companies

of Automobile industry


of Automobile industry

Table No. 8.10 ANOVA: Total Leverage -Automobile

Anova: Total Leverage –Automobile SUMMARY

Groups Count Sum Average Variance Ashok Leyland Ltd. 5 12.82 2.564 17.76768 Bajaj Auto Ltd. 5 9.39 1.878 6.88437 Hero Motorcorp Ltd. 5 -8.83 -1.766 45.59873 Mahindra & Mahindra Ltd. 5 -0.31 -0.062 1.89852

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Maruti Suzuki India Ltd. 5 11.95 2.39 21.9318 Tata Motors Ltd. 5 6.28 1.256 20.96543 TVS Motors 5 -125.11 -25.022 3932.222

ANOVA


Between Groups 2981.631 6 496.9385 0.859486 0.536253 2.445259 Within Groups 16189.07 28 578.1812 Total 19170.7 34

α=0.05;

Here,

Fcal. = 0.859 < Fcrit. =2.445


significant difference in total leverage among the selected companies of Automobile

industry

Table No. 8.11 Total Leverage - Steel Industry


Average company wise

1 Bhusan Steel Ltd. -0.57 100.7 -76.31 1.45 -14.29 2.196 2 Essar Steel India Ltd. -55.39 -96.18 -1202.32 596.68 108.94 -129.654 3 Jindal Steel and

Power Ltd. 23.65 -84 39.04 2.2 -24.55 -8.732

4 JSW Ispat Steel Ltd -2077.21 -53.16 186.85 -83.36

-506.72 5 JSW Steel Ltd -74.72 364.21 -16.63 -19.41 10.97 52.884 6 SAIL -18.13 9.46 -27.38 -27.77 -38.74 -20.512 7 Tata Steel Ltd. 9.16 -19.13 26.98 -3.67 -24.39 -2.21 Average year wise -313.32 31.7 -152.82 66.59 2.99 -87.54 Source: Ace Analyser Database

On the basis of above table we can say that average total leverage of sampled steel

companies is -87.54. Moreover among the selected companies highest total leverage

is of JSW steel (52.88) followed by Bhusan steel (2.196). While lowest total leverage

Is of JSW Ispat steel which is -506.72. Rest of all the companies have negative total

leverage.

Hypothesis Testing


of steel industry

H1: There is significant difference in total leverage among the selected companies of

steel industry

298

Table No. 8.12 ANOVA: Total Leverage – Steel Companies

Anova: Total Leverage – Steel

SUMMARY


Bhusan Steel Ltd. 5 10.98 2.196 4036.556

Essar Steel India Ltd. 5 -648.27 -129.654 435434

Jindal Steel and Power Ltd. 5 -43.66 -8.732 2341.437

JSW Ispat Steel Ltd 4 -

2026.88 -506.72 1110810

JSW Steel Ltd 5 264.42 52.884 31255.52

SAIL 5 -102.56 -20.512 334.0257

Tata Steel Ltd. 5 -11.05 -2.21 440.4259

ANOVA


Between Groups 935324.1 6 155887.3 0.805111 0.574796 2.459108

Within Groups 5227797 27 193622.1

Total 6163121 33

α=0.05;

Here,

Fcal. = 0.80 < Fcrit. =2.459


significant difference in total leverage among the selected companies of steel industry

299

THE RELATIONSHIP BETWEEN COST OF CAPITAL, LEVERAGE,

EARNING PER SHARE AND VALUATION OF FIRM.

Table No. 8.13 WACC vs. EPS – All sampled companies

Name of Companies WACC EPS

Ashok Leyland Ltd. 6.61 4.62

Bajaj Auto Ltd. 3.34 13.25

Hero Motorcorp Ltd. 6.34 10.38

Mahindra & Mahindra Ltd. 4.27 9.17

Maruti Suzuki India Ltd. 4.83 6.57

Tata Motors Ltd. 4.9 3.95

TVS Motors 5.6 1.99

Bhusan Steel Ltd. 3.89 11.1

Jindal Steel and Power Ltd. 4.68 18.21

JSW Ispat Steel Ltd 10.11 -7.04

JSW Steel Ltd 4.27 7.99

SAIL 3.61 11.79

Tata Steel Ltd. 3.43 19.93


Hypothesis Testing


companies

H1: There is correlation between cost of capital and EPS for all sampled companies

Table No. 8.14 Analysis of Coefficient of Correlation and t – Test for WACC vs

EPS - All Companies

Details Coefficient

of

Correlation

DOF t – Test H0 Result

Calculated

Value

Critical

Value

All Sampled

Companies

-0.79422 12 -4.33511 2.179 Fail to

rejected

Insignificant

α=0.05;

Here,

tcal. = -4.33 < tcrit. = -2.179

Hence we will reject null hypothesis. Therefore we can say that there is correlation

between cost of capital and EPS for all sampled companies.

Chart No. 8.1

Above chart showing scatter plot of two variables

sampled companies supports the result of our hypothesis test, there is negative

correlation exist and visible through above diagram.

Hypothesis Testing

Ho: There is no correlation between cost of capital and EPS for a

automobile companies

H1: There is correlation between cost of capital and EPS for all sampled automobile

companies

8.15 WACC vs. EPS

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.

Mahindra & Mahindra Ltd.

Maruti Suzuki India Ltd.

Tata Motors Ltd.

TVS Motors

300

Chart No. 8.1 WACC vs. EPS (All Companies)

Above chart showing scatter plot of two variables viz. cost of capital and EPS for all


correlation exist and visible through above diagram.

Ho: There is no correlation between cost of capital and EPS for a


8.15 WACC vs. EPS – Automobile companies








TVS Motors 5.6 1.99


viz. cost of capital and EPS for all




Table No. 8.16 Analysis of Coefficient of Correlation and t

EPS -Automobile Companies

Details Coefficient of Correlation

All Sampled Automobile Companies

-0.50846

α=0.05;

Here,

tcal. = -1.320 > tcrit. = -2.179

Hence we will fail to reject null hypothesis. Therefore we can say that

correlation between cost of capital and EPS for all sampled automobile companies

Chart No. 8.2 WACC vs EPS

Above chart showing sc

sampled companies of automobile industry also supports the result of our hypothesis

test, there is no visible pattern or relation found from above diagram

Hypothesis Testing

Ho: There is no correlation between cost of capital and EPS for all sampled steel

companies

H1: There is correlation between cost of capital and EPS for all sampled steel

companies

301

Table No. 8.16 Analysis of Coefficient of Correlation and t – Test for

Automobile Companies

DOF t – Test H0 Result

Calculated Value

Critical Value

5 -1.32038 2.571 Fail to rejected

Insignificant

2.179

Hence we will fail to reject null hypothesis. Therefore we can say that


Chart No. 8.2 WACC vs EPS – Automobile Companies

Above chart showing scatter plot of two variables viz. cost of capital and EPS for


test, there is no visible pattern or relation found from above diagram.

correlation between cost of capital and EPS for all sampled steel


Test for WACC vs

Result

Insignificant



atter plot of two variables viz. cost of capital and EPS for


correlation between cost of capital and EPS for all sampled steel


Table No. 8.17 WACC vs. EPS

Name of Companies

Bhusan Steel Ltd.

Essar Steel India Ltd.

Jindal Steel and Power Ltd.

JSW Ispat Steel Ltd

JSW Steel Ltd

SAIL

Tata Steel Ltd.

Table No. 8.18 Analysis of Coefficient of


All Sampled Steel Companies

-0.87716

α=0.05;

Here,

tcal. = -3.65 < tcrit. = -2.571


between cost of capital and EPS for all sampled steel companies

Chart No.3 WACC vs EPS

302

Table No. 8.17 WACC vs. EPS – Steel companies







SAIL 3.61 11.79



Table No. 8.18 Analysis of Coefficient of Correlation and t – Test for WACC vs

EPS -Steel Companies

DOF t - Test H0 ResultCalculated Value

Critical Value


Insignificant

2.571


between cost of capital and EPS for all sampled steel companies

Chart No.3 WACC vs EPS – Steel Companies

Test for WACC vs

Result

Insignificant


303


sampled companies of steel industry also supports the result of our hypothesis test,

there is negative correlation found between the variable under study.

Hypothesis Testing

Ho: There is no correlation between total leverage and valuation of firm for all

sampled companies

H1: There is correlation between total leverage and valuation of firm for all sampled

companies

Table No. 8.19 Total Leverage vs. Valuation – All companies

Name of Companies Total Leverage

Valuation

Ashok Leyland Ltd. 2.564 -98262

Bajaj Auto Ltd. 1.878 -20019

Hero Motorcorp Ltd. -1.766 62951

Mahindra & Mahindra Ltd. -0.062 8962

Maruti Suzuki India Ltd. 2.39 -15190

Tata Motors Ltd. 1.256 12235

TVS Motors -25.022 -1754

Bhusan Steel Ltd. 2.196 185334

Jindal Steel and Power Ltd. -8.732 1530.18

JSW Ispat Steel Ltd -506.72 24089.35

JSW Steel Ltd 52.884 18701.13

SAIL -20.512 41395.63

Tata Steel Ltd. -2.21 47124.26


Table No. 8.20 Analysis of Coefficient of Correlation and t – Test for Total

Leverage vs. Valuation - All Companies


DOF t - Test

H0 Result Calculated Value

Critical Value

All Sampled Companies

-0.0171 12 -0.05672 2.201 Fail to

rejected Insignificant

α=0.05;

Here,

tcal. = -0.05672 < tcrit. = 2.201


correlation between total leverage and valuation of firm for all sampled companies

Chart No. 8.4 Total Leverage vs. Valuation

Above chart showing scatter plot of two variables viz. total leverage and valuation of

firm for all sampled companies also supports the result of our hypothesis test, there is

no visible pattern or relation foun

Hypothesis Testing


sampled automobile companies



Table No. 8.21 Total Leverage

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.



Tata Motors Ltd.

TVS Motors

304

Chart No. 8.4 Total Leverage vs. Valuation



no visible pattern or relation found from above diagram.




Total Leverage vs. Valuation – Automobile companies


Valuation



Hero Motorcorp Ltd. -1.766 62951

Mahindra & Mahindra Ltd. -0.062 8962



TVS Motors -25.022 -1754






Automobile companies


Leverage vs. Valuation



-0.17762

α=0.05;

Here,

tcal. = -0.403 > tcrit. = -2.571


correlation between total leverage and valuation of firm for all sampled automobile

companies

Chart No. 8.5 T

Above chart showing scatter plot

firm for sampled companies of automobile industry also supports the result of our

hypothesis test, there is no visible pattern or relation found from above diagram.

Hypothesis Testing


sampled steel companies


steel companies

305

Table No. 8.22 Analysis of Coefficient of Correlation and t – Test for Total

Leverage vs. Valuation - Automobile Companies


Critical Value


Insignificant

2.571

to reject null hypothesis. Therefore we can say that there is no


Chart No. 8.5 Total Leverage vs Valuation – Auto Companies




orrelation between total leverage and valuation of firm for all


Test for Total

Result

Insignificant



Auto Companies

of two variables viz. total leverage and valuation of



orrelation between total leverage and valuation of firm for all


Table No. 8.23 Total Leverage and Valuation

Name

Bhusan Steel Ltd.


JSW Ispat Steel Ltd

JSW Steel Ltd

SAIL

Tata Steel Ltd.





0.196892

α=0.05;

Here,

tcal. = 0.402 < tcrit. = 2.571


correlation between total leverage and valuation of firm

companies

Chart No. 8.6

306

Table No. 8.23 Total Leverage and Valuation – Steel Companies


Valuation


Jindal Steel and Power Ltd. -8.732 1530.18


JSW Steel Ltd 52.884 18701.13

SAIL -20.512 41395.63

Tata Steel Ltd. -2.21 47124.26


Analysis of Coefficient of Correlation and t – Test for Total

- Steel Companies

Coefficient of DOF t - Test H0 ResultCalculated Value

Critical Value

5 0.401647 2.571 Fail to rejected

Insignificant

tcal. = 0.402 < tcrit. = 2.571


correlation between total leverage and valuation of firm for all sampled steel

Total Leverage vs. Valuation – Steel Companies

Steel Companies

Test for Total

Result

Insignificant


for all sampled steel

Steel Companies

307


firm for sampled companies of steel industry also supports the result of our hypothesis


Hypothesis Testing

Ho: There is no correlation between EPS and total leverage of firm for all sampled

companies

H1: There is correlation between EPS and total leverage of firm for all sampled

companies

Table No. 8.25 EPS and Total Leverage – All Companies

Name of Companies EPS Total Leverage



Hero Motorcorp Ltd. 10.38 -1.766

Mahindra & Mahindra Ltd. 9.17 -0.062



TVS Motors 1.99 -25.022


Jindal Steel and Power Ltd. 18.21 -8.732

JSW Ispat Steel Ltd -7.04 -506.72


SAIL 11.79 -20.512

Tata Steel Ltd. 19.93 -2.21


Table No. 8.26 Analysis of Coefficient of Correlation and t – Test for EPS vs

Total Leverage - All Companies


DOF t - Test H0 Result Calculated Value

Critical Value


0.658813 11 2.904447 2.201 Rejected Significant

α=0.05;

Here,

tcal. = 2.90 < tcrit. = 2.201

Hence we will fail to reject null hypothesis. Therefore we can say that there is

correlation between EPS and total leverage of firm for all sampled companies

Chart No. 8.7

Above chart showing scatter plot of two variables viz. total leverage and EPS for all

sampled companies also supports the result of our hypothesis test, there is positive

correlation exist between two variables under study.

Hypothesis Testing





Table No. 8.27 EPS and Total Leverage

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.



Tata Motors Ltd.

TVS Motors

308

Chart No. 8.7 Total Leverage vs. EPS – All Companies



on exist between two variables under study.



EPS and Total Leverage – Automobile Companies








TVS Motors 1.99 -25.022






Companies

Table No. 8.28 Analysis of Coefficient of Correlation and t Total Leverage - AutomobileDetails Coefficient

of Correlation


0.513907

α=0.05;

Here,

tcal. = 1.34 < tcrit. = 2.571

Hence we will fail to reject

correlation between EPS and total leverage of firm for all sampled automobile

companies

Chart No. 8.8 Total Leverage vs. EPS

Above chart showing scatter plot of two variables



Hypothesis Testing

Ho: There is no correlation between EPS and total

steel companies

H1: There is correlation between EPS and total leverage of firm for all sampled steel

companies

309

Analysis of Coefficient of Correlation and t – Test for Automobile Companies


Critical Value


Insignificant

tcal. = 1.34 < tcrit. = 2.571



Chart No. 8.8 Total Leverage vs. EPS – Automobile Companies

Above chart showing scatter plot of two variables viz. total leverage and EPS for





Test for EPS vs.

Result

Insignificant

null hypothesis. Therefore we can say that there is no



viz. total leverage and EPS for


leverage of firm for all sampled


Table No. 8.29

Name of Companies

Bhusan Steel



JSW Ispat Steel Ltd

JSW Steel Ltd

SAIL

Tata Steel Ltd.


Total LeverageSteel Companies


All Sampled Steel Companies 0.77446

α=0.05;

Here,

tcal. = 2.44 < tcrit. = 2.571


correlation between EPS and total leverage of firm for all sampled steel companies.

Chart No. 8.9

310

Table No. 8.29 EPS and Total Leverage – Steel Companies



Essar Steel India Ltd. -3.28 -129.654


JSW Ispat Steel Ltd -7.04 -506.72


11.79 -20.512



Analysis of Coefficient of Correlation and t – Test for

Companies

Coefficient of

DOF t - Test

H0 Calculated Value

Critical Value

0.77446 5 2.448408 2.571 Fail to rejected Insignificant

tcal. = 2.44 < tcrit. = 2.571



Chart No. 8.9 Total Leverage vs. EPS – Steel Companies

Companies

Test for EPS vs.

Result

Insignificant



Steel Companies

311

Above chart showing scatter plot of two variables viz. total leverage and EPS for


there is no visible pattern or relation found from above diagram.

Hypothesis Testing

Ho: There is no correlation between WACC and total leverage of firm for all sampled

companies

H1: There is correlation between WACC and total leverage of firm for all sampled

companies

Table No. 8.31 WACC and Total Leverage – All Companies

Name of Companies WACC Total Leverage







TVS Motors 5.6 -25.022





SAIL 3.61 -20.512



Table No. 8.32 Analysis of Coefficient of Correlation and t – Test for WACC vs. Total Leverage - All Companies Details Coefficient of

Correlation DOF t - Test H0 Result

Calculated Value

Critical Value


-0.82585 12 -4.85741 2.201 Rejected Significant

α=0.05;

Here,

tcal. = -4.86 < tcrit. = -2.201


between WACC and total leverage of firm for all sampled companies.

Chart No. 8.10 Total Leverage vs. WACC

Above chart showing scatter plot of two variables viz. total leverage and cost of

capital for all sampled companies also supports the result of our hypothesis test, there

is strong negative correlation is observed between the two variables

study.

Hypothesis Testing





Table No. 8.33 WACC and Total Leverage

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.



Tata Motors Ltd.

TVS Motors

312

Chart No. 8.10 Total Leverage vs. WACC - All Companies



is strong negative correlation is observed between the two variables over the period of



WACC and Total Leverage – Automobile Companies








TVS Motors 5.6 -25.022


All Companies



over the period of



Companies


Total Leverage - Automobile



-0.21

α=0.05;

Here,

tcal. = -0.480 > tcrit. = -2.571

Hence we will fail to reject null hypothesis. Therefore we can

correlation between WACC and total leverage of firm for all sampled automobile

companies.

Chart No. 8.11 Total Leverage vs. WACC

Above chart showing scatter plot of two variables viz. total leverage and cost o

capital for sampled companies of automobile industry also supports the result of our


Hypothesis Testing

Ho: There is no correlation between WACC and total leverage of firm

steel companies


steel companies

313




Critical Value


Insignificant

2.571



Total Leverage vs. WACC - Automobile Companies

Above chart showing scatter plot of two variables viz. total leverage and cost o





Test for WACC vs.

Result

Insignificant

say that there is no


Companies




for all sampled


Table No. 8.35

Name of Companies

Bhusan Steel Ltd.


JSW Ispat Steel Ltd

JSW Steel Ltd

SAIL

Tata Steel Ltd.


Total LeverageSteel Companies



-0.97027

α=0.05;

Here,

tcal. = -8.02 < tcrit. = -2.571


between WACC and total leverage of firm for all sampled steel companies.

Chart No. 8.12

314

Table No. 8.35 WACC and Total Leverage – Steel Companies






SAIL 3.61 -20.512




Companies


Critical Value


Insignificant

2.571



Chart No. 8.12 Total Leverage vs. WACC - Steel Companies

Companies

Test for WACC vs.

Result

Insignificant



Companies

315


capital for sampled companies of steel industry also supports the result of our


Hypothesis Testing

Ho: There is no correlation between WACC and financial leverage of firm for all

sampled companies

H1: There is correlation between WACC and financial leverage of firm for all

sampled companies

Table No. 8.37 WACC vs. Financial Leverage – All Companies

Name of Companies WACC Financial Leverage







TVS Motors 5.6 1.232

Bhusan Steel Ltd. 3.89 -0.918

Essar Steel India Ltd. 4.68 13.288


JSW Ispat Steel Ltd 4.27 2.704


SAIL 3.43 -0.964


Table No. 8.38 Analysis of Coefficient of Correlation and t – Test for WACC vs.

Financial Leverage - All Companies


DOF t – Test H0 Result Calculated Value

Critical Value


0.363034 12 1.292208 2.201 Fail to rejected

Insignificant

α=0.05;

Here,

tcal. = 1.29 < tcrit. = 2.201


correlation between WACC and financial leverage of firm for all sampled companies.

Chart No. 8.13

Above chart showing scatter plot of two variables viz. financial leverage and cost of


is no visible pattern or relation

Hypothesis Testing





Table No. 8.39 WACC vs. Financial Leverage

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.


Maruti

Tata Motors Ltd.

TVS Motors

316

Chart No. 8.13 Financial Leverage vs. WACC – All Companies



is no visible pattern or relation found from above diagram.




companies

WACC vs. Financial Leverage – Automobile Companies










All Companies





Companies


Financial Leverage - Automobile



0.63073

α=0.05;

Here,

tcal. = 1.82 < tcrit. = 2.57

Hence we will fail to reject null hypothesis.

correlation between WACC and financial leverage of firm for all sampled automobile

companies

Chart No. 8.14 Financial Leverage vs. WACC

Above chart showing scatter plot of two variables viz. f



Hypothesis Testing

Ho: There is no correlation between




317

0 Analysis of Coefficient of Correlation and t – Test for


DOF t – Test H0 ResultCalculated Value

Critical Value


Insignificant

tcal. = 1.82 < tcrit. = 2.57



Financial Leverage vs. WACC – Automobile Companies






Test for WACC vs.

Result

Insignificant

Therefore we can say that there is no


Companies

inancial leverage and cost of



WACC and financial leverage of firm for all


Table No. 8.41 WACC vs. Financial Leverage

Name of Companies

Bhusan Steel Ltd.


JSW Ispat Steel Ltd

JSW Steel Ltd

SAIL

Tata Steel Ltd.


Financial Leverage – Steel



0.380832

α=0.05;

Here,

tcal. = 0.824 < tcrit. = 2.571


correlation between WACC and financial leverage of firm for all sampled steel

companies

Chart No. 8.15 Financial Leverage vs. WACC

318

WACC vs. Financial Leverage – Steel Companies






3.61 1.094




Steel Companies


Critical Value


Insignificant

tcal. = 0.824 < tcrit. = 2.571



Financial Leverage vs. WACC – Steel Companies

Companies

Test for WACC vs.

Result

Insignificant



Companies

319


capital for sampled companies of steel industry also supports the result of our


Hypothesis Testing

Ho: There is no correlation between WACC and valuation of firm for all sampled

companies

H1: There is correlation between WACC and valuation of firm for all sampled

companies

Table No. 8.43 WACC and Valuation –All Companies

Name of Companies WACC Valuation



Hero Motorcorp Ltd. 6.34 62951

Mahindra & Mahindra Ltd. 4.27 8962



TVS Motors 5.6 -1754





SAIL 3.61 41395.63




Valuation - All Companies



Critical Value


-0.21013 12 -0.71282 2.201 Fail to rejected

Insignificant

α=0.05;

Here,

tcal. = -0.7128 >tcrit. = -2.201


correlation between WACC and valuation of firm for all sampled companies.

Chart No.8.16

Above chart showing scatter plot of two variables viz. cost of capital and valuation of


no visible pattern or relation found from

Hypothesis Testing





Table No. 8.45

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.



Tata Motors

TVS Motors

320

Chart No.8.16 WACC vs Valuation – All Companies



no visible pattern or relation found from above diagram.



Table No. 8.45 WACC and Valuation –Automobile Companies














Companies


Valuation –Automobile



-0.12041

α=0.05;

Here,

tcal. = -0.2712 >tcrit. = -2.571


correlation between WACC and valuation of firm for all sampled automobile

companies

Chart No.8.17


firm for sampled companies


Hypothesis Testing


steel companies

H1: There is correlation between WACC and valuation of firm for all sampled steel

companies

321


Companies


Critical Value


Insignificant

2.571



7 WACC vs Valuation – Automobile Companies





There is correlation between WACC and valuation of firm for all sampled steel

Test for WACC vs.

Result

Insignificant



Companies


of automobile industry also supports the result of our



There is correlation between WACC and valuation of firm for all sampled steel

Table No. 8.47 WACC and Valuation

Name of Companies

Bhusan Steel Ltd.


JSW Ispat

JSW Steel Ltd

SAIL

Tata Steel Ltd.


Valuation - Steel Companies



-0.26779

α=0.05;

Here,

tcal. = -0.556 >tcrit. = - 2.571


correlation between WACC and valuation of firm for all sampled steel companies

Chart No. 8.18

322

Table No. 8.47 WACC and Valuation –Steel Companies






SAIL 3.61 41395.63



Companies

Coefficient of DOF t - Test H0 Result

Calculated Value

Critical Value


Insignificant

2.571



Chart No. 8.18 WACC vs Valuation – steel Companies

Steel Companies

Test for WACC vs.

Result

Insignificant



323


firm for sampled companies of steel industry also supports the result of our hypothesis


Hypothesis Testing

Ho: There is no correlation between WACC and EPS of firm for all sampled

companies

H1: There is correlation between WACC and EPS of firm for all sampled companies

Table No. 8.49 WACC vs. EPS – All Companies








TVS Motors 5.6 1.99





SAIL 3.61 11.79




EPS - All Companies



Critical Value


-0.79422 12 -4.33511 2.201 Fail to rejected

Insignificant

α=0.05;

Here,

tcal. = -4.3351 < tcrit. = -2.201


between WACC and EPS of firm for all sampled companies

Chart No.8.19 WACC vs EPS


sampled companies of also

strong negative correlation between WACC and EPS for sampled companies.

Hypothesis Testing Ho: There is no correlation between WACC and EPS of firm for all sampled automobile companies H1: There is correlation between WACC and EPS of firm for all sampled automobile companies

Table No. 8.51

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.

Mahindra


Tata Motors Ltd.

TVS Motors


EPS - Automobile Companies



-0.50846

324

Chart No.8.19 WACC vs EPS – All Companies


sampled companies of also supports the result of our hypothesis test, as we can see



correlation between WACC and EPS of firm for all sampled automobile

Table No. 8.51 WACC vs. EPS – Automobile Companies








TVS Motors 5.6 1.99



Companies

Coefficient of

DOF t - Test H0 Calculated Value

Critical Value



supports the result of our hypothesis test, as we can see



correlation between WACC and EPS of firm for all sampled automobile


Test for WACC vs.

Result

Insignificant

α=0.05;

Here,

tcal. = -1.32 < tcrit. = 2.179


correlation between WACC and EPS of firm for all sampled automobile companies

Chart No. 8.20

Above chart showing scatter plo



Hypothesis Testing

Ho: There is no correlation

companies

H1: There is correlation between WACC and EPS of firm for all sampled steel

companies

Table No. 8.53

Name of Companies

Bhusan Steel Ltd.

Jindal

JSW Ispat Steel Ltd

JSW Steel Ltd

SAIL

325

1.32 < tcrit. = 2.179



8.20 WACC vs EPS – Automobile Companies





Ho: There is no correlation between WACC and EPS of firm for all sampled steel


Table No. 8.53 WACC vs. EPS – Steel Companies






SAIL 3.61 11.79



Companies

t of two variables viz. cost of capital and EPS for


between WACC and EPS of firm for all sampled steel


Tata Steel Ltd.


EPS - Steel Companies



-0.87716

α=0.05;

Here,

tcal. = -3.65 < tcrit. = 2.179

Hence we will fail to reject null hypothesis. Therefore we can say that there is

correlation between WACC and EPS of firm for all sampled steel companies

Chart No.

Above chart showing scatter plot of two variables viz. cost of c


there is negative correlation exist and visible between two variables for the selected

steel companies.

Hypothesis Testing

Ho: There is no correlation

sampled companies

326





Critical Value


Insignificant

3.65 < tcrit. = 2.179

will fail to reject null hypothesis. Therefore we can say that there is


Chart No. 8.21 WACC vs EPS – Steel Companies




Ho: There is no correlation between EPS and financial leverage of firm for all

Test for WACC vs

Result

Insignificant

will fail to reject null hypothesis. Therefore we can say that there is


apital and EPS for



between EPS and financial leverage of firm for all

327

Ho: There is correlation between EPS and financial leverage of firm for all sampled

companies

Table No. 8.55 EPS and Financial Leverage – All Companies

Name of Companies EPS Financial Leverage









Essar Steel India Ltd. -3.28 13.178




SAIL 11.79 1.094



Table No. 8.56 Analysis of Coefficient of Correlation and t – Test for EPS vs.

Financial Leverage - All Companies



Critical Value


-0.02526 12 -0.08382 2.179 Fail to rejected

Insignificant

α=0.05;

Here,

tcal. = -0.838 > tcrit. = -2.179


correlation between EPS and financial leverage of firm for all sampled companies.

Chart No. 8.22

Above chart showing scatter plot of two variables viz. EPS and financial leverage for

all sampled companies also supports the result of our hypothesis test, there is no

visible pattern or relation found from

Hypothesis Testing



H1: There is correlation between EPS and financial leverage of firm for all sampled


Table No. 8.57 EPS and Financial Leverage

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.



Tata Motors Ltd.

TVS Motors


Financial Leverage - Automobile



-0.49196

α=0.05;

328

Chart No. 8.22 EPS vs. Financial Leverage – All companies



visible pattern or relation found from above diagram.




EPS and Financial Leverage – Automobile Companies

Name of Companies EPS Financial Leverage












Critical Value


Insignificant

All companies





Companies

Test for EPS vs.

Insignificant

Here,

tcal. = -1.26 > tcrit. = -2.571

Hence we will fail to reject null hypothesis. Therefore we can

correlation between EPS and financial leverage of firm for all sampled automobile

companies

Chart No. 8.23 EPS vs. Financial Leverage

Above chart showing scatter plot of two variables viz. EPS and financial



Hypothesis Testing

Ho: There is no correlation between EPS and financial leverage of f



steel companies

Table No. 8.59EPS and Financial Leverage

Name of Companies

Bhusan Steel Ltd.



JSW Ispat Steel Ltd

JSW Steel Ltd

SAIL

Tata Steel Ltd.

329

2.571



EPS vs. Financial Leverage – Automobile companies

Above chart showing scatter plot of two variables viz. EPS and financial



Ho: There is no correlation between EPS and financial leverage of f


Table No. 8.59EPS and Financial Leverage – Steel Companies

Name of Companies EPS Financial Leverage Bhusan Steel Ltd. 11.1 -0.918 Essar Steel India Ltd. -3.28 13.178 Jindal Steel and Power Ltd. 18.21 13.288 JSW Ispat Steel Ltd -7.04 6.1875 JSW Steel Ltd 7.99 2.704

11.79 1.094 Tata Steel Ltd. 19.93 -0.964


say that there is no


companies





Companies


Financial Leverage - Steel



-0.34382

α=0.05;

Here,

tcal. = -0.819 > tcrit. = - 2.571


correlation between EPS and financial leverage of firm for all sampled steel

companies

Chart No. 8.24




Hypothesis Testing

Ho: There is no correlation between EPS and valuation of firm for all sampled

companies

H1: There is correlation between EPS and valuation of firm for all sampled

companies

330

0 Analysis of Coefficient of Correlation and t – Test for

Steel Companies

Coefficient of DOF t – Test H0 ResultCalculated Value

Critical Value


Insignificant

2.571



Chart No. 8.24 EPS vs. Financial Leverage – Steel companies



tern or relation found from above diagram.



Test for EPS vs.

Result

Insignificant



companies





331

Table No. 8.61 EPS

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.



Tata Motors Ltd.

TVS Motors

Bhusan Steel Ltd.


JSW Ispat Steel Ltd

JSW Steel Ltd

SAIL

Tata Steel Ltd.





0.215967

α=0.05;

Here,

tcal. = 0.733 < tcrit. = 2.201


correlation between EPS and valuation of firm for all sampled companies

Chart No. 8.25

332

Table No. 8.61 EPS and Valuation – All Companies

Name of Companies EPS Valuation












SAIL 11.79 41395.63



Analysis of Coefficient of Correlation and t – Test for Total

- All Companies

DOF t – Test H0 ResultCalculated Value

Critical Value


Insignificant

tcal. = 0.733 < tcrit. = 2.201



Chart No. 8.25 EPS vs Valuation – All Companies

Test for Total

Result

Insignificant



333

Above chart showing scatter plot of two variables viz. EPS and valuation of firm for


visible pattern or relation found from above diagram.

Hypothesis Testing





Table No. 8.63 EPS and Valuation – Automobile Companies









Table No. 8.64 Analysis of Coefficient of Correlation and t – Test for EPS vs.

Valuation - All Companies


DOF t - Test H0 Result

Calculated Value

Critical Value


0.280882 5 0.654417 2.571 Fail to rejected

Insignificant

α=0.05;

Here,

tcal. = 0.645v < tcrit. = 2.571


correlation between EPS and valuation of firm for all sampled automobile companies

Chart No. 8.26




Hypothesis Testing

Ho: There is no correlation between EPS and valuation of firm for all sampled steel

companies


companies

Table No. 8.65

Name of Companies

Bhusan Steel Ltd.


JSW Ispat Steel Ltd

JSW Steel Ltd

SAIL

Tata Steel Ltd.

Table No. 8.66 Analysis of Coefficient of Correlation and t Valuation - Steel CompaniesDetails Coefficient of

Correlation


0.063782

334

Chart No. 8.26 EPS vs Valuation – Automobile Companies






Table No. 8.65 EPS and Valuation – Steel Companies






SAIL 11.79 41395.63



Analysis of Coefficient of Correlation and t – Test for Companies

Coefficient of DOF t – Test H0 ResultCalculated Value

Critical Value


Insignificant

Companies




H1: There is correlation between EPS and valuation of firm for all sampled steel

Test for EPS vs.

Result

Insignificant

α=0.05;

Here,

tcal. = 0.128 < tcrit. = 2.571


correlation between EPS and valuation of firm for all sampled steel companies

Chart No. 8.27


sampled companies of steel industry also supports the


Hypothesis Testing

Ho: There is no correlation between Financial Leverage and valuation of firm for all

sampled companies

H1: There is correlation between

sampled companies

335

tcal. = 0.128 < tcrit. = 2.571


between EPS and valuation of firm for all sampled steel companies

Chart No. 8.27 EPS vs Valuation – Steel Companies





H1: There is correlation between Financial Leverage and valuation of firm for all


between EPS and valuation of firm for all sampled steel companies


result of our hypothesis test,


Financial Leverage and valuation of firm for all

336

Table No. 8.67 Financial Leverage and Valuation – All Companies

Name of Companies Financial Leverage Valuation Ashok Leyland Ltd. 3.612 -98262 Bajaj Auto Ltd. 0.738 -20019 Hero Motorcorp Ltd. 1.108 62951 Mahindra & Mahindra Ltd. 1.028 8962 Maruti Suzuki India Ltd. 0.868 -15190 Tata Motors Ltd. 1.93 12235 TVS Motors 1.232 -1754 Bhusan Steel Ltd. -0.918 185334 Jindal Steel and Power Ltd. 13.288 1530.18 JSW Ispat Steel Ltd 6.1875 24089.35 JSW Steel Ltd 2.704 18701.13 SAIL 1.094 41395.63 Tata Steel Ltd. -0.964 47124.26


Table No. 8.68 Analysis of Coefficient of Correlation and t – Test for Financial

Leverage vs. Valuation - All Companies



Critical Value


-0.31151 12 -1.08725 2.201 Fail to rejected

Insignificant

α=0.05;

Here,

tcal. = -1.087 < tcrit. = 2.179


correlation between Financial Leverage and valuation of firm for all sampled

companies

Chart No. 8.28 Financial Leverage vs. Valuation

Above chart showing scatter plot of two

valuation of firm for all sampled companies also supports the result of our hypothesis


Hypothesis Testing

Ho: There is no correlation between




Table No. 8.69 Financial Leverage and Valuation

Name of Companies

Ashok Leyland Ltd.

Bajaj Auto Ltd.

Hero Motorcorp Ltd.



Tata Motors Ltd.

TVS

337

Chart No. 8.28 Financial Leverage vs. Valuation – All Companies

Above chart showing scatter plot of two variables viz. financial leverage and







Financial Leverage and Valuation – Automobile Compan

Name of Companies Financial Leverage

Valuation









All Companies

variables viz. financial leverage and


Financial Leverage and valuation of firm for all


Companies





-0.70277

α=0.05;

Here,

tcal. = -2.21 >tcrit. = -2.571




Chart No. 8.29 Financial Leverage vs. Valuation


valuation of firm for sampled companies of automobile industry also supports the

result of our hypothesis test, there is no visible pattern or relation found from above

diagram.

Hypothesis Testing

Ho: There is no correlation between Financial Leverage and


338


- Automobile Companies

DOF t - Test H0 Result

Calculated Value

Critical Value


Insignificant

2.571



Financial Leverage vs. Valuation – Automobile Companies


on of firm for sampled companies of automobile industry also supports the



Test for Financial

Result

Insignificant



Companies


on of firm for sampled companies of automobile industry also supports the


valuation of firm for all

339



Table No. 8.71 Financial Leverage and Valuation – Steel Companies

Name of Companies Financial Leverage

Valuation

Bhusan Steel Ltd. -0.918 185334



JSW Steel Ltd 2.704 18701.13

SAIL 1.094 41395.63

Tata Steel Ltd. -0.964 47124.26


Table No. 8.72 Analysis of Coefficient of Correlation and t – Test for Financial

Leverage vs. Valuation - Steel Companies



Critical Value


-0.59475 5 -1.47964 2.571 Fail to rejected

Insignificant

α=0.05;

Here,

tcal. = -1.48 < tcrit. = 2.571


correlation between Financial Leverage and valuation of firm for all sampled steel

companies

Chart No. 8.30 Financial Leverage vs. Valuation – Steel Companies




diagram.

340



hypothesis test, there is no visible pattern or relation found from above



hypothesis test, there is no visible pattern or relation found from above

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