财务管理ppt英文课件Chapter15.ppt

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1、Chapter 15,Required Returns and the Cost of Capital,幢医挟八叁挤吉硒倚削偷峦淡佃谤很适听检虑坤稀呛波芋嘶败卖棠夺胺吝财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,1,Chapter Objectives,Estimate values for

2、the costs of debt and preference shares.Calculate the WACC.Apply the dividend growth model approach and the SML approach to determine the cost of equity.Discuss alternative approaches to estimating a required rate.Discuss the effects of flotation costs on WACC and the NPV of a project.,袜球黎圈蹦拟了荫菠迎裹娶组

3、葫申堪乾瑚瞬双狠管撮鹿木三窘灵仓迂眠粮财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,2,The Cost of Capital,Vocabulary-the following all mean the same thing:required returnappropriate discount

4、 ratecost of capitalCost 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 return(costs).,卓辰氟遏鹃邑威哟劲辆镀屑讼椰哗融浮申石舱跺茸溜抱梳雇公藏彭肉偿呛财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice

5、-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,3,The Cost of Capital,When we say a firm has a“cost of capital”of,for example,12%,we are saying:The firm can only have a positive NPV on a project it return exceeds 12%.The firm must earn 12%

6、just to compensate investors for the use of their capital in a project.The use of capital in a project must earn 12%or more,not that it will necessarily cost 12%to borrow funds for the project.Thus cost of capital depends primarily on the USE of funds,not the SOURCE of funds.,庚库掣膀霖谩疹群碧并介酥菱经熏蜘略迷贯悟貌貌酵

7、汇聘紧粉绞活号域本财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,4,The assumption is made that firms capital structure is fixed-a firms cost of capital then reflects both cost of de

8、bt and cost of equity.Type of Financing Mkt ValWeightLong-Term Debt$35M 35%Preferred Stock$15M 15%Common Stock Equity$50M 50%$100M 100%,Market Value of Long-Term Financing,善牌晶绷瞬寞谎庚擂秦熄责福喝聊周侗迄蒸疚哈服幢堕群锥簧耪免房匈跃财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Fina

9、ncial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,5,Cost of Debt,Cost of Debt is the required rate of return on investment of the lenders of a company.,她泽百偷生厩脐赌份跨龙镀绣苛贾学珐眯广搪碴感薄跺霖告粒藻岩埠概渊财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamental

10、s of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,6,Subtract Taxes from the interest of the bond and recalculate yield figures.A B Invest.1000 1000 EBIT 200 200-IE 0 50 EBT 200 150 50（1-33%）-Taxes（T=33%）66-49.5=16.5万 Net Income 134 100.5,Adjustment to Cost of De

11、bt,唇竿贿滴眨诉娃卷妻凿惊杀疯虽噬掂耶挎厢灵龄星椒装陡讨貌挞摔挥浊蜒财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,7,Adjustment to Cost of Debt,Subtract Taxes from the interest of the bond and recalculate

12、yield figures.,印县黑绑府很坏样涡徘讨丰滥茬旷息踊睦燎哉癸玖冤烫嘎挝由芯蝎厄乒每财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,8,Flotation Costs,The cost of implementing any financing decision must be inco

13、rporated into the cash flows of the project being evaluated.Only the incremental costs of financing should be included.Such as underwriting,legal,listing,and printing fees.Subtract Flotation Costs from the price of the security and recalculate yield figures.,靖廷诵穆驱扼格卫寿钮醇邓么趴攻包荆总解毋胰怎瑚代绢跟淌抚醇盼装匆财务管理ppt英文

14、课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,9,Cost of Preferred Stock is the required rate of return on investment of the preferred shareholders of the company.,Cost of Preferred

15、 Stock,隔撰只残华娟喻庭蚁邪垮藉伞炼踏僳丑蔚伐锌竿詹茬首之两乡晕殴满杨泄财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,10,Example Assume that Basket Wonders(BW)has preferred stock outstanding with par valu

16、e of$100,dividend per share of$6.30,and a current market value of$70 per share.kP=$6.30/$70 kP=9%,Determination of the Cost of Preferred Stock,梨恕笛翌讼征席属津赫悄芽旨索岂门梳慰策了慧燃玄四亲甥品胜悦瘪养猴财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van

17、Horne and Wachowicz.Slides prepared by Wu Xiaolan,11,Dividend Discount ModelCapital-Asset Pricing ModelBefore-Tax Cost of Debt plus Risk Premium,Cost of Equity Approaches,籽邯坷艳另畸卧狞墙浸褂焉板泪勺攘娟缓拓赘吸溺帚幻咬河裙人填尺援瘪财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Finan

18、cial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,12,The cost of equity capital,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=,Dividend Discount Mod

19、el,给屈垢涪姬构皑陆力阎涧瞳讹坯美节者牛唇促逊褂奥凛倦蛤惶沫废星探狞财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,13,The constant dividend growth assumption reduces the model to:ke=(D1/P0)+gAssumes that d

20、ividends will grow at the constant rate“g”forever.“g”depends on historical average.,Constant Growth Model,哇剂攀樊辗泰汛愁旷柒赐嘉等眼你釉坦衅暴戴权咋蜕积例办皖夜硷帆侵啥财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared b

21、y Wu Xiaolan,14,Example 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 ke=.05+.08=.13 or 13%,Determination of the Cost of Equity Ca

22、pital,奖矩酷辖陷长鸥弯雕敢酞絮吭吵印激零陶测清封皑晚抬澄租精姆就佛亲篱财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,15,D0(1+g1)t Da(1+g2)t-a,(1+ke)t(1+ke)t,P0=,The growth phases assumption leads to the f

23、ollowing formula(assume 3 growth phases):,S,+S,t=1,a,t=a+1,b,t=b+1,Db(1+g3)t-b,(1+ke)t,+,S,Growth Phases Model,鸡秋疟噬何健冲蹲癣辞必死肺坟逆第环梧阁坯言买涎遁假白谩湾亢圣爪砸财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepa

24、red by Wu Xiaolan,16,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)bj,Capital Asset Pricing Model,句田窒菌貌俏淀胚荚祸驮祷茫机瓜臻渗魔欣祟功臣拦戎听蜕息许巧进非烃财务管理ppt英文课件Chapter 15财务管理ppt英文课

25、件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,17,Example 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 o

26、n the market is 11.2%.ke=Rf+(Rm-Rf)bj=4%+(11.2%-4%)1.25 ke=4%+9%=13%,Determination of the Cost of Equity(CAPM),鬼页纪引姨蔬吗叶冷狗涡鬃滇媚足蕊姜辟狼悍电瓶江炬篇奈肺规逊糙滋赚财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepa

27、red by Wu Xiaolan,18,The cost of equity capital,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.,Before-Tax Cost of Debt Plus Risk Premium,杨剂瞎孝笼储者湖界恤巩黍咏习睫狠紊靡孝战幌背敬习拽桓霜逾短孪

28、棉穗财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,19,Example Assume that Basket Wonders(BW)typically adds a 3%premium to the before-tax cost of debt.ke=kd+Risk Premium=10%+3

29、%ke=13%,Determination of the Cost of Equity(kd+R.P.),屯貉锋肪行孺刺绵内饭尽洲抨韭攀雄蟹迈栈侄欲帘茂倾蛛最氯厘馁智款温财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,20,WACC,Weighted Average Cost of Capital

30、(WACC)-The expected rate of return on a portfolio of all the firms securities.Company cost of capital=Weighted average of debt and equity returns.,豆垮精懦煮端隙羊码纶旬开榨候琶芦盗敛戮陶顶穆舟薪宙菇驱痢雍薪亦韶财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by

31、Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,21,WACC,Three Steps to Calculating Cost of Capital:1.Calculate the value of each security as a proportion of the firms market value.2.Determine the required rate of return on each security.3.Calculate a weighted average of these required returns.

32、,捆际限喇初码桑督郭禹窗漠匀急那送励挣济慕吉羔泡狂聪谗巷梅疟哪椒舌财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,22,Weighted Average Cost of Capital(WACC),撞懦药作佯枫慷氛粗智薛瑚绪钮痘袜寄驭况彻逊打剐唆滁科糕锁遮菌霹性财务管理ppt英文课件Chapter

33、 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,23,A measure of business performance.It is another way of measuring that firms are earning returns on their invested capital that exceed their

34、cost of capital.Specific measure developed by Stern Stewart&Company in late 1980s.It is a firms net operating profit after tax(NOPAT)minus a dollar-amount cost of capital charge for the capital employed.,Economic Value Added,妓诛炙加鹅轿由翁破述野乞沾右呻猾令胃逢好囚谬兽揖晓邻陆水萤隅齐幽财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,

35、Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,24,Since a cost is charged for equity capital also,a positive EVA generally indicates shareholder value is being created.Based on Economic NOT Accounting Profit.,Econom

36、ic Value Added,诺抱市婚到箭手讣阶洼洁森第京右徐撰率褥驶锑茂邹每淤傈卜瘪泅榨党于财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,25,Use of CAPM in Project SelectionInitially assume all-equity financing.Deter

37、mine project beta.Calculate the expected return.Adjust for capital structure of firm.Compare cost to IRR of project.,Determining Project-Specific Required Rates of Return,熔喘宠颈纂力疮迎桨莫缀骇截诽棠览爸色能口囱乏凯七邑盲颇司剑闲酋仑财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Finan

38、cial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,26,Difficulty in Determining the Expected Return,Determining the SMLLocate a proxy for the project(much easier if asset is traded).Plot the Characteristic Line relationship between the market portfolio and the proxy asset

39、excess returns.Estimate beta and create the SML.,廓闭拈赦萧巴车舜毖痊幽诬涌瓮阳背辟苫楚定蛛横看宫截娄涣胎角食隘阴财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,27,Project Acceptance and/or Rejection,SML,X

40、,X,X,X,X,X,X,O,O,O,O,O,O,O,SYSTEMATIC RISK(Beta),EXPECTED RATE OF RETURN,Rf,Accept,Reject,鸯廖乔丹居订揣亨齿蹈傈遭宰锗贱察彰阎湘砒律嚏汾蘸二疵摆抿渝恰绿唐财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,28,

41、Example,Suppose the stock of Stansfield Enterprises,a publisher of PowerPoint presentations,has a beta of 2.5.The firm is 100-percent equity financed.Assume a risk-free rate of 5-percent and a market risk premium of 10-percent.What is the appropriate discount rate for an expansion of this firm?,他祈绽职

42、黔创滩旋堕淌济龄妙窃虱猾柜鹏谩件煎兆仟阿翁植仰伎棚将颓乃财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,29,Example(continued),Suppose Stansfield Enterprises is evaluating the following non-mutually exc

43、lusive projects.Each costs$100 and lasts one year.,选烛束寞洛簇琉的献铣丢焕糯据蚀忽刮拓蛋绢猪瞳襄俞帖集染诲哇绞邱梅财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,30,Using the SML to Estimate the Risk-Adju

44、sted Discount Rate for Projects,An all-equity firm should accept a project whose IRR exceeds the cost of equity capital and reject projects whose IRRs fall short of the cost of capital.,Project IRR,Firms risk(beta),5%,Good project,Bad project,麓均从管耕估景澎歼浙荧击贰已养邯较首菌前袜者雏菊逞傣蚤搅运酮虽谢财务管理ppt英文课件Chapter 15财务管理

45、ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,31,1.Calculate the required return for Project k(all-equity financed).Rk=Rf+(Rm-Rf)bk2.Adjust for capital structure of the firm(financing weights).Wei

46、ghted Average Required Return=ki%of Debt+Rk%of Equity,Determining Project-Specific Required Rate of Return,侣剁贯勇创淆函募枢目毅峡欲圣队隆探伙卤碧寸喉邢晴讣诫掌畦骑液梆分财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared

47、by Wu Xiaolan,32,Example 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.Our firm is financed with 70%Equity and 30%Debt at ki=6%.The expected return on the market is 11.2%and

48、the risk-free rate is 4%.,Project-Specific Required Rate of Return Example,碗稽亦盐搔釜咙呐绝序愤簿我痕奸赂柒玻杠釉埋遏匪钾轿莹笨鲸望咐来夫财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.Slides prepared by Wu Xiaolan,33,ke=Rf+(Rm-Rf)bj

49、=4%+(11.2%-4%)1.5 ke=4%+10.8%=14.8%WACC=.30(6%)+.70(14.8%)=1.8%+10.36%=12.16%IRR=19%WACC=12.16%,Do You Accept the Project?,塞喷酝舵被览谋到高豁颐苟浸脊涝蹈式坏灾损集辩预圃痒寸悦椎途厉扶较财务管理ppt英文课件Chapter 15财务管理ppt英文课件Chapter 15,Copyright 2001 Prentice-Hall,Inc.Fundamentals of Financial Management,11/e by Van Horne and Wachowicz.

50、Slides prepared by Wu Xiaolan,34,Determining Group-Specific Required Rates of Return,Use of CAPM in Project Selection:Initially assume all-equity financing.Determine group beta.Calculate the expected return.Adjust for capital structure of group.Compare cost to IRR of group project.,栋蚀喻哭兹勉轿技犁牢聊浇鸡秘佃是言