課程財務(wù)管理基礎(chǔ)英文ch(4)課件

1、15-1 Pearson Education Limited 2004 Fundamentals of Financial Management, 12/e Created by: Gregory A. Kuhlemeyer, Ph.D. Carroll College, Waukesha, WI 15-2 uExplain how a firm creates value and identify the key sources of value creation. uDefine the overall “cost of capital” of the firm. uCalculate t

2、he costs of the individual components of a firms cost of capital - cost of debt, cost of preferred stock, and cost of equity. uExplain and use alternative models to determine the cost of equity, including the dividend discount approach, the capital- asset pricing model (CAPM) approach, and the befor

3、e-tax cost of debt plus risk premium approach. uCalculate the firms weighted average cost of capital (WACC) and understand its rationale, use, and limitations. uExplain how the concept of Economic Value Added (EVA) is related to value creation and the firms cost of capital. uUnderstand the capital-a

4、sset pricing models role in computing project-specific and group-specific required rates of return. 15-3 u Creation of Value u Overall Cost of Capital of the Firm u Project-Specific Required Rates u Group-Specific Required Rates u Total Risk Evaluation 15-4 Growth phase of product cycle Barriers to

5、competitive entry Other - e.g., patents, temporary monopoly power, oligopoly pricing Cost Marketing and price Perceived quality Superior organizational capability 15-5 Cost of Capital is the required rate of return on the various types of financing. The overall cost of capital is a weighted average

6、of the individual required rates of return (costs). 15-6 Type of Financing Mkt ValWeight Long-Term Debt $ 35M 35% Preferred Stock$ 15M 15% Common Stock Equity $ 50M 50% $ 100M 100% 15-7 is the required rate of return on investment of the lenders of a company. ki = kd ( 1 - T ) P0 = Ij + Pj (1 + kd)j

7、 S S n j =1 15-8 Assume that Basket Wonders (BW) has $1,000 par value zero-coupon bonds outstanding. BW bonds are currently trading at $385.54 with 10 years to maturity. BW tax bracket is 40%. $385.54 = $0 + $1,000 (1 + kd)10 15-9 (1 + kd)10 = $1,000 / $385.54 = 2.5938 (1 + kd)= (2.5938) (1/10) = 1.

8、1 kd= .1 or 10% ki = 10% ( 1 - .40 ) = 15-10 is the required rate of return on investment of the preferred shareholders of the company. kP = DP / P0 15-11 Assume that Basket Wonders (BW) has preferred stock outstanding with par value of $100, dividend per share of $6.30, and a current market value o

9、f $70 per share. kP = $6.30 / $70 = 15-12 15-13 The , ke, is the discount rate that equates the present value of all expected future dividends with the current market price of the stock. D1 D2 D (1+ke)1 (1+ke)2 (1+ke) + . . . + P0 = 15-14 The reduces the model to: ke = ( D1 / P0 ) + g Assumes that d

10、ividends will grow at the constant rate “g” forever. 15-15 Assume that Basket Wonders (BW) has common stock outstanding with a current market value of $64.80 per share, current dividend of $3 per share, and a dividend growth rate of 8% forever. ke = ( D1 / P0 ) + g ke = ($3(1.08) / $64.80) + .08 = .

11、05 + .08 = or 15-16 D0(1+g1)t Da(1+g2)t-a (1+ke)t (1+ke)t P0 = The S S+ + S S t=1 a t=a+1 b t=b+1 Db(1+g3)t-b (1+ke)t + S S 15-17 The cost of equity capital, ke, is equated to the required rate of return in market equilibrium. The risk-return relationship is described by the Security Market Line (SM

12、L). ke = Rj = Rf + (Rm - Rf)b bj 15-18 Assume that Basket Wonders (BW) has a company beta of 1.25. Research by Julie Miller suggests that the risk-free rate is 4% and the expected return on the market is 11.2% ke = Rf + (Rm - Rf)b bj = 4% + (11.2% - 4%)1.25 = 4% + 9% = 15-19 The cost of equity capit

13、al, ke, is the sum of the before-tax cost of debt and a risk premium in expected return for common stock over debt. ke = kd + Risk Premium* * Risk premium is not the same as CAPM risk premium 15-20 Assume that Basket Wonders (BW) typically adds a 3% premium to the before-tax cost of debt. ke = kd +

14、Risk Premium = 10% + 3% = 15-21 Constant Growth Model Capital Asset Pricing Model Cost of Debt + Risk Premium Generally, the three methods will not agree. 15-22 Cost of Capital = kx(Wx) WACC = .35(6%) + .15(9%) + .50(13%) WACC = .021 + .0135 + .065 = .0995 or 9.95% S S n x=1 15-23 uMarginal Capital

15、Costs uCapital Raised in Different Proportions than WACC 15-24 are the costs associated with issuing securities such as underwriting, legal, listing, and printing fees. a.Adjustment to Initial Outlay b.Adjustment to Discount Rate 15-25 uA measure of business performance. uIt is another way of measur

16、ing that firms are earning returns on their invested capital that exceed their cost of capital. uSpecific measure developed by Stern Stewart and Company in late 1980s. 15-26 EVA = NOPAT Cost of Capital x Capital Employed uSince a cost is charged for equity capital also, a positive EVA generally indi

17、cates shareholder value is being created. uBased on Economic NOT Accounting Profit. uNOPAT net operating profit after tax is a companys potential after-tax profit if it was all- equity-financed or “unlevered.” 15-27 Add Flotation Costs (FC) to the Initial Cash Outlay (ICO). Impact: the NPV NPV =S S

18、n t=1 CFt (1 + k)t - ( ICO + FC ) 15-28 Subtract Flotation Costs from the proceeds (price) of the security and recalculate yield figures. Impact: the cost for any capital component with flotation costs. Result: Increases the WACC, which the NPV. 15-29 uInitially assume all-equity financing. uDetermi

19、ne project beta. uCalculate the expected return. uAdjust for capital structure of firm. uCompare cost to IRR of project. Use of CAPM in Project Selection: 15-30 uLocate a proxy for the project (much easier if asset is traded). uPlot the Characteristic Line relationship between the market portfolio a

20、nd the proxy asset excess returns. uEstimate beta and create the SML. Determining the SML: 15-31 SML X X X X X X X O O O O O O O SYSTEMATIC RISK (Beta) EXPECTED RATE OF RETURN Rf Accept Reject 15-32 1. Calculate the required return for Project k (all-equity financed). Rk = Rf + (Rm - Rf)b bk 2. Adju

21、st for capital structure of the firm (financing weights). Weighted Average Required Return = ki% of Debt + Rk% of Equity 15-33 Assume a computer networking project is being considered with an IRR of 19%. Examination of firms in the networking industry allows us to estimate an all-equity beta of 1.5.

22、 Our firm is financed with 70% Equity and 30% Debt at ki=6%. The expected return on the market is 11.2% and the risk-free rate is 4%. 15-34 ke = Rf + (Rm - Rf)b bj = 4% + (11.2% - 4%)1.5 = 4% + 10.8% = = .30(6%) + .70(14.8%) = 1.8% + 10.36% = = = 15-35 uInitially assume all-equity financing. uDeterm

23、ine group beta. uCalculate the expected return. uAdjust for capital structure of group. uCompare cost to IRR of group project. Use of CAPM in Project Selection: 15-36 Group-Specific Required Returns Company Cost of Capital Systematic Risk (Beta) Expected Rate of Return 15-37 uAmount of non-equity fi

24、nancing relative to the proxy firm. Adjust project beta if necessary. uStandard problems in the use of CAPM. Potential insolvency is a total-risk problem rather than just systematic risk (CAPM). 15-38 Risk-Adjusted Discount Rate Approach (RADR) The required return is increased (decreased) relative t

25、o the firms overall cost of capital for projects or groups showing greater (smaller) than “average” risk. 15-39 Discount Rate (%) 0 3 6 9 12 15 RADR “high” risk at 15% (Reject!) RADR “l(fā)ow” risk at 10% (Accept!) Adjusting for risk correctly may influence the ultimate Project decision. Net Present Val

26、ue $000s 15 10 5 0 -4 15-40 Probability Distribution Approach Acceptance of a single project with a positive NPV depends on the dispersion of NPVs and the utility preferences of management. 15-41 B C A Indifference Curves STANDARD DEVIATION EXPECTED VALUE OF NPV Curves show “HIGH” Risk Aversion 15-4

27、2 B C A Indifference Curves STANDARD DEVIATION EXPECTED VALUE OF NPV Curves show “MODERATE” Risk Aversion 15-43 B C A Indifference Curves STANDARD DEVIATION EXPECTED VALUE OF NPV Curves show “LOW” Risk Aversion 15-44 j: Beta of a levered firm. ju: Beta of an unlevered firm (an all-equity financed fi

28、rm). B/S: Debt-to-Equity ratio in Market Value terms. TC : The corporate tax rate. 15-45 Adjusted Present Value (APV) is the sum of the discounted value of a projects operating cash flows plus the value of any tax-shield benefits of interest associated with the projects financing minus any flotation

29、 costs. APV = Unlevered Project Value + Value of Project Financing 15-46 Assume Basket Wonders is considering a new $425,000 automated basket weaving machine that will save $100,000 per year for the next 6 years. The required rate on unlevered equity is 11%. BW can borrow $180,000 at 7% with $10,000 after-tax flotation costs. Princi