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Hyundai’s Fate in Pakistan

Nouman Ali, Sawaira Fatima, Saad Hassan

Product #:W34884
Supplier:Ivey
Discipline:Finance
Setting:Pakistan, 2022
Details:Case (PDF) • 10 pages • 2024-04-25

Subjects:

Personal financeFinance and investing

Industries:

Fabrication and manufacturing

Geography:

AsiaPakistan
Your Price:$9.71

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In 2022, the manager of Hyundai Nishat Motor (Private) Limited was ambitious to expand the company in Pakistan and continue its hard-earned growth. His first step was determining whether the expansion plan was worth it. But how could he estimate the cost of equity of a privately held firm? Although the capital asset pricing model (CAPM) and dividend discount model (DDM) were most commonly used to calculate the cost of equity, neither of those models could be used with an unlisted company, which had no stock price and hence no stock returns and beta. Financial consultants thus advised the manager to research the weighted average cost of capital (WACC) and the cost of equity of Hyundai’s competitors in a comparable company analysis.

Learning Objectives

This case is intended for use in undergraduate-level courses on investments, introduction to business finance, and risk management. By working through the case and assignment questions, students will have the opportunity to do the following:
  • Learn about the difficulties private companies encounter when assessing the cost of equity capital, and investigate the pure-play method as a potential replacement for conventional models like the CAPM and DDM.
  • Comprehend the significance of precise valuation when choosing between different options for business expansion.
  • Evaluate the potential advantages and dangers connected with a growth plan, and study various factors that determine the cost of equity capital for private businesses, such as comparable industries and risk concerns.
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Case Study: Hyundai’s Fate in Pakistan (English version) | Ivey Publishing