課程財務管理基礎英文ch4課件

1、15-1 pearson education limited 2004fundamentals of financial management, 12/ecreated by: gregory a. kuhlemeyer, ph.d.carroll college, waukesha, wi15-2uexplain how a firm creates value and identify the key sources of value creation.udefine the overall “cost of capital” of the firm. ucalculate the cos

2、ts 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 before-tax c

3、ost 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-asset pric

4、ing models role in computing project-specific and group-specific required rates of return.15-3u creation of valueu overall cost of capital of the firmu project-specific required ratesu group-specific required ratesu total risk evaluation15-4growthphase ofproductcyclebarriers tocompetitiveentryother

5、-e.g., patents,temporarymonopolypower,oligopolypricingcostmarketingandpriceperceivedqualitysuperiororganizationalcapability15-5cost of capital is the required rate of return on the various types of financing. the overall cost of capital is a weighted average of the individual required rates of retur

6、n (costs).15-6type of financing mkt valweightlong-term debt $ 35m 35%preferred stock$ 15m 15%common stock equity $ 50m 50%$ 100m 100%15-7is the required rate of return on investment of the lenders of a company.ki = kd ( 1 - t )p0 =ij + pj(1 + kd)js snj =115-8assume that basket wonders (bw) has $1,00

7、0 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)1015-9(1 + kd)10 = $1,000 / $385.54= 2.5938(1 + kd)= (2.5938) (1/10)= 1.1 kd= .1 or 10% ki = 10% ( 1 - .40 ) = 15-10is the required rate o

8、f return on investment of the preferred shareholders of the company.kp = dp / p015-11assume that basket wonders (bw) has preferred stock outstanding with par value of $100, dividend per share of $6.30, and a current market value of $70 per share.kp = $6.30 / $70 = 15-1215-13 the , ke, is the discoun

9、t 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 ) + gassumes that dividends will grow at the constant rate “g” forever.15-15assume that basket w

10、onders (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 ) + gke = ($3(1.08) / $64.80) + .08 = .05 + .08 = or 15-16 d0(1+g1)t da(1+g2)t-a(1+ke)t (1+ke)tp0 = the s s+ + s st=1at=

11、a+1bt=b+1 db(1+g3)t-b(1+ke)t+s s15-17 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 (sml).ke = rj = rf + (rm - rf)b bj15-18assume that basket wonders (bw) has a company beta of 1.

12、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 capital, ke, is the sum of the before-tax cost of debt and a risk premium in expected return for com

13、mon stock over debt. ke = kd + risk premium* risk premium is not the same as capm risk premium15-20assume that basket wonders (bw) typically adds a 3% premium to the before-tax cost of debt. ke = kd + risk premium= 10% + 3% = 15-21constant growth modelcapital asset pricing modelcost of debt + risk p

14、remium generally, the three methods will not agree. 15-22cost of capital = kx(wx)wacc = .35(6%) + .15(9%) + .50(13%)wacc = .021 + .0135 + .065 = .0995 or 9.95%s snx=115-23umarginal capital costsucapital raised in different proportions than wacc15-24are the costs associated with issuing securities su

15、ch as underwriting, legal, listing, and printing fees.a.adjustment to initial outlayb.adjustment to discount rate15-25ua measure of business performance.uit is another way of measuring that firms are earning returns on their invested capital that exceed their cost of capital.uspecific measure develo

16、ped by stern stewart and company in late 1980s.15-26eva = nopat cost of capital x capital employedusince a cost is charged for equity capital also, a positive eva generally indicates shareholder value is being created.ubased on economic not accounting profit.unopat net operating profit after tax is

17、a companys potential after-tax profit if it was all-equity-financed or “unlevered.”15-27add flotation costs (fc) to the initial cash outlay (ico).impact: the npvnpv =s snt=1cft(1 + k)t- ( ico + fc )15-28subtract flotation costs from the proceeds (price) of the security and recalculate yield figures.

18、impact: the cost for any capital component with flotation costs.result: increases the wacc, which the npv.15-29uinitially assume all-equity financing.udetermine project beta.ucalculate the expected return.uadjust for capital structure of firm.ucompare cost to irr of project.use of capm in project se

19、lection:15-30ulocate a proxy for the project (much easier if asset is traded).uplot the characteristic line relationship between the market portfolio and the proxy asset excess returns.uestimate beta and create the sml.determining the sml:15-31smlxxxxxxxooooooosystematic risk (beta)expected rate of

20、returnrfacceptreject15-32 1. calculate the required return for project k (all-equity financed).rk = rf + (rm - rf)b bk 2. adjust for capital structure of thefirm (financing weights).weighted average required return =ki% of debt + rk% of equity 15-33assume a computer networking project is being consi

21、dered with an irr of 19%.examination of firms in the networking industry allows us to estimate an all-equity beta of 1.5. 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

22、%)1.5 = 4% + 10.8% = = .30(6%) + .70(14.8%)= 1.8% + 10.36% = = = 15-35uinitially assume all-equity financing.udetermine 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:15-36group-specificrequired

23、returnscompany costof capitalsystematic risk (beta)expected rate of return15-37uamount of non-equity financing 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).15-3

24、8risk-adjusted discount rate approach (radr) the required return is increased (decreased) relative to the firms overall cost of capital for projects or groups showing greater (smaller) than “average” risk.15-39discount rate (%)0 3 6 9 12 15radr “high” risk at 15%(reject!)radr “l(fā)ow” risk at 10%(accep

25、t!)adjusting for risk correctlymay influence the ultimateproject decision.net present value$000s151050-415-40probability distribution approach acceptance of a single project with a positive npv depends on the dispersion of npvs and the utility preferences of management.15-41bcaindifferencecurvesstan

26、dard deviationexpected value of npvcurves show“high”risk aversion15-42bcaindifferencecurvesstandard deviationexpected value of npvcurves show“moderate”risk aversion15-43bcaindifferencecurvesstandard deviationexpected value of npvcurves show“l(fā)ow”risk aversion15-44j: beta of a levered firm. ju: beta o

27、f an unlevered firm (an all-equity financed firm). b/s: debt-to-equity ratio in market value terms.tc : the corporate tax rate.15-45adjusted 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

28、 the projects financing minus any flotation costs.apv = unleveredproject value+value ofproject financing15-46assume 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. princ