Annual Accounts and Report as at 30 June 2011 Draft - Mediobanca

credit as to €3.6m and credit cards as to €2.7m. The goodwill has been allocatedto the following cash generating units:€mConsumer credit ................. 280.6Credit cards ..................... 73.4Salary-backed finance ............ 11.9Goodwill ......................... 365.9The impairment test was passed successfully for all three segments, as thevalue in use (calculated using a dividend discount model) was higher than thecarrying value, including goodwill and the share of associated brands. Thecalculation was based on the most up-to-date financial flows projected over a timehorizon of five years, while reflecting the most recent market scenarios (healthyperformance in consumer credit, and slowdown in the credit cards segment) andthe company’s competitive potential:Cash generating unitsNew loansCAGRTotal loans30/6/11 Avg.Cost ofborrowingConsumer credit 3.7% 5.5% 5.6% 3.0%Credit cards 5.4% 3.0% 1.8% 2.9%Salary-backed finance 5.2% 7.5% 9.4% 3.0%The terminal value has been calculated assuming a constant growth rate:– cost of capital (Ke): 11.5%, deriving from a risk premium of 5.75%, arisk-free rate of 4.07% and levered beta of 1.29;– growth rate (g): 2%.These values have been borne out even in a stressed scenario for both cost ofcapital and growth rates (+/–0.5% and +/–0.25% respectively).226 –