Siemens 2006 Annual Report Download - page 122

Management’s discussion and analysis
118
The underlying assumptions of our EVA calculations are continuously reviewed. For fiscal
2007, we will adjust the key assumptions for our EVA calculation, particularly with respect to
the market risk. This will result in the following figures of Weighted Average Cost of Capital
(WACC):
In order to determine the capital charge for each Operations Group, the respective percent-
age is applied against the average net operating assets. Average net operating assets were
determined on a monthly basis, principally based on net capital employed. With the transition
to IFRS in fiscal 2007, Siemens will modify the definition of net capital employed, in particular,
liabilities deducted within net capital employed will be defined more comprehensively. Prior
year data will be adjusted for incentive and reporting purposes to maintain a meaningful com-
parison.
The cost of risk-oriented equity of the Financing and Real Estate Groups was also adjusted
to the changes in our business environment. The following table illustrates the current and the
former percentages of our cost of equity:
WACC
Operations Groups new old
Siemens Business Services (SBS) 8.5% 7.5%
Automation and Drives (A&D) 7.5% 6.5%
Industrial Solutions and Services (I&S) 8% 7%
Siemens Building Technologies (SBT) 8% 7%
Power Generation (PG) 8% 7%
Power Transmission and Distribution (PTD) 8% 7%
Transportation Systems (TS) 8% 7%
Siemens VDO Automotive (SV) 8% 7%
Medical Solutions (Med) 8% 7%
Osram 7.5% 6.5%
Cost of equity
Financing and Real Estate Groups new old
Siemens Financial Services (SFS) 8.5% 7.5%
Siemens Real Estate (SRE) 7.5% 6.5%