the cost of capital(英文版)(ppt 40頁)-全文預(yù)覽
【正文】 e project undertaken by the firm. Therefore, the WACC only represents the “hurdle rate” for a typical project with average risk. ?Different projects have different risks. The project’s WACC should be adjusted to reflect the project’s risk. 10 31 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Comments about flotation costs: ?Flotation costs depend on the risk of the firm and the type of capital being raised. ?The flotation costs are highest for mon equity. However, since most firms issue equity infrequently, the perproject cost is fairly small. ?We will frequently ignore flotation costs when calculating the WACC. 10 27 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. What’s a reasonable final estimate of ks? Method Estimate CAPM % DCF % kd + RP % Average % 10 23 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Suppose the pany has been earning 15% on equity (ROE = 15%) and retaining 35% (dividend payout = 65%), and this situation is expected to continue. What’s the expected future g? 10 19 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. What’s the cost of mon equity based on the CAPM? kRF = 7%, RPM = 6%, b = . ks = kRF + (kM – kRF )b. = % + (%) = %. 10 17 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Example: kp = 9% kd = 10% T = 40% kp, AT = kp – kp (1 – )(T) = 9% – 9%()() = %. kd, AT = 10% – 10%() = %. AT Risk Premium on Preferred = %. 10 13 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Note: ?Preferred dividends are not tax deductible, so no tax adjustment. Just kp. ?Nominal kp is used. ?Our calculation ignores flotation costs. 10 10 Copyright 169。 10%Q。 2023 by Harcourt, Inc. All rights reserved. The cost of capital is used primarily to make decisions that involve raising new capital. So, focus on today’s marginal costs (for WACC). Should we focus on historical (embedded) costs or new (marginal) costs? 10 5 Copyright 169。10 1 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Stockholders focus on AT CFs. Therefore, we should focus on AT capital costs, ., use AT costs in WACC. Only kd needs adjustment. Should we focus on beforetax or
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