財(cái)務(wù)管理基礎(chǔ)課件：Risk and Capital Budgeting

RiskandCapitalBudgeting

ChapterOutlineConceptofriskincapitalbudgetingConceptofriskaverseRiskandrateofreturnRiskassessment–simulationmodelsanddecisiontreesImpactofindividualriskyprojectontotalriskofthefirmDefinitionofRisk

inCapitalBudgetingRiskisdefinedintermsofvariabilityofpossibleoutcomesfromagiveninvestmentRiskismeasurednotonlyintermsoflossesbutalsointermsofuncertaintyVariabilityandRiskThreeinvestmentproposalsillustratedinthefollowingslideAllinvestmentsintheillustrationhavethesameexpectedvalueInvestment“C”isthemostriskyinvestmentowingtoitsvariabilityVariabilityandRisk(cont’d)TheConceptofRisk-AverseRiskavoidanceunlessadequatelycompensatedforMostinvestorsandmanagersarerisk-averseTheypreferrelativecertaintyasopposedtouncertaintyTheyexpecthighervalueorreturnforriskyinvestmentsActualMeasurementofRiskBasicstatisticaldevicesusedExpectedvalue:D=∑DPStandarddeviation:σ=√∑(D–D)2PCo-efficientofVariation:(V)=σ

DProbabilityDistributionofwithDifferingDegreesofRiskThelargerthestandarddeviation(orspreadofoutcomes),thegreateristheriskProbabilityDistributionwithDifferingDegreesofRisk(cont’d)DirectcomparisonofstandarddeviationswouldnotbehelpfulinmeasuringriskiftheexpectedvaluesoftheinvestmentsaredifferentAstandarddeviationof$600withanexpectedvalueof$6,000mayindicatelessriskthanastandarddeviationof$190withanexpectedvalueofonly$600CoefficientofVariation(V)Thesizedifficultycanbeeliminatedbyintroducing“CoefficientofVariation”(V)Formula:Co-efficientofVariation:(V)=σ÷DThelargerthecoefficientofvariation,thegreatertheriskRiskmeasure—Beta(β)AriskmeasurewidelyusedwithportfoliosofcommonstockMeasuresthevolatilityofreturnsonanindividualstockrelativetoreturnsonastockmarketindexBetasforFive-YearPeriod

(EndingJanuary2009)Riskandthe

CapitalBudgetingProcessAninformedinvestororamanagerwoulddifferentiatebetween:Investmentsthatproduce‘certain’returns,andInvestmentsthatproduceanexpectedvalueofreturn,buthaveahighcoefficientofvariationRisk-AdjustedDiscountRateDifferentcapitalexpenditureproposalswithdifferentrisklevelswouldrequiredifferentdiscountratesProjectwithnormalamountofriskdiscountedatthecostofcapitalProjectwithgreaterthannormalriskdiscountedathigherrate(asshowninthefollowingslide)Riskisassumedtobemeasuredbythecoefficientofvariation(V)RelationshipofRisk

toDiscountRateThisisanexampleofbeingincreasinglyrisk-averseathigherlevelsofriskandpotentialreturnIncreasingRiskoverTimeAccurateforecastingbecomesmoreobscurefartheroutintimeUnexpectedevents:CreateahigherstandarddeviationincashflowsIncreaseriskassociatedwithlong-livedprojectsUseofprogressivelyhigherdiscountratestocompensateforrisktendstopenalizelatercashflowsmorethanearlieronesQualitativeMeasuresSettingupofriskclassesbasedonqualitativeconsiderationsThisagainequatesthediscountratetotheperceivedriskExampleofsuchriskclassesillustratedinthefollowingslideRiskCategoriesandDiscountratesCapitalBudgetingAnalysisThisfollowingtableshowsInvestmentBasapreferredinvestmentbasedonNPVcalculationwithoutconsideringtheriskfactor

Table13–4CapitalBudgetingDecisionAdjustedforRisk:ExampleAssumption(Table13-4):InvestmentAcallsforanadditiontonormalproductlineandisassigneddiscountrateof10%InvestmentBrepresentsanewproductinforeignmarketandmustcarry20%discountratetoadjustforalargeriskcomponentCapitalBudgetingDecisionAdjustedforRisk:Example(cont’d)InvestmentAistheonlyacceptablealternativeafteradjustingtheriskfactorSimulationModelsHelpindealingwithuncertaintiesinvolvedinforecastingtheoutcomeofcapitalbudgetingprojectsorothertypesofdecisionsComputersenablethesimulationofvariouseconomicandfinancialoutcomesusinganumberofvariablesAMonteCarlosimulationmodelusesrandomvariableforinputsRelyonrepetitionofthesamerandomprocessasmanyasseveralhundredtimesSimulationModels(cont’d)HavetheabilitytotestvariouscombinationsofeventsAreusedtotestpossiblechangesinvariableconditionsincludedintheprocessAllowtheplannertoask“whatif”questionsAredrivenbysalesforecasts,withassumptionstoderiveincomestatementsandbalancesheetsGenerateprobabilityacceptancecurvesforcapitalbudgetingdecisionsSimulationFlowChartDecisionTreesHelplayoutasequenceofdecisionsthatcanbemadePresentatabularorgraphicalcomparisonbetweeninvestmentchoicesProvideanimportantanalyticalprocessDecisionTrees(cont’d)Assumingthatafirmisconsideringtwochoices:ProjectA:ExpandingtheproductionsemiconductorsforsaletoendusersProjectB:Enteringthehighlycompetitivepersonalcomputermarketusingthefirm’stechnologyCostofbothprojectsis$60million,withdifferentnetpresentvalue(NPV)andriskProjectA:Highlikelihoodofpositiverateofreturnandthelong-rungrowthisareasonableexpectationProjectB:StiffcompetitionmayresultinlossofmoremoneyorhigherprofitifsalesarehighDecisionTrees(cont’d)ThePortfolioEffectConsidersimpactofagiveninvestmentproposalontheoverallriskoffirmAfirmplanningtoinvestinthebuildingproductsindustrycarryingahighdegreeofriskHasaprimarybusinessinmanufactureofelectroniccomponentsforindustrialuseTheinvestingfirmcouldaltercyclicalfluctuationsinherentinitsprimarybusinessandreduceoverallriskexposureThestandarddeviationfortheentirecompanycouldbereducedThus,overallriskexposureofthatfirmmightdiminishPortfolioRiskWhetheragiveninvestmentwouldchangetheoverallriskofthefirmdependsonitsrelationshiptootherinvestmentsHighlycorrelatedinvestments-donotdiversifyawayriskNegativelycorrelatedinvestments-providehighdegreeofriskreductionUncorrelatedinvestments-providesomeoverallreductioninriskCoefficientofCorrelationRepresentstheextentofcorrelationamongvariousprojects/investmentsAmeasurethatmaytakeonvaluesanywherefrom-1to+1Realworld–amorelikelymeasurebetween-.2negativecorrelationand+.3positivecorrelationRiskcanbereducedby:CombiningriskyassetswithlowornegativelycorrelatedassetsCoefficientofCorrelation:CaseofConglomerate,Inc.,andTwoMergerCandidatesMergerwithNegativeCorrelation,Inc.,appearstobethebestdecisionEvaluationofCombinationsTwoprimaryobjectivesinchoosingcombinations:Achievethehighestposs