internatinalfinancemanagement【國際財務(wù)管理】lecture5costofcapital-資料下載頁
2024-10-16 16:13本頁面
【正文】 f the firm to the party to whom payments are due. ? As a consequence, debt should include – Any interestbearing liability, whether shortterm or longterm. – Any lease obligation, whether operating or capital. Estimating the Cost of Debt ? If the firm has bonds outstanding, and the bonds are traded, the yield to maturity on a longterm, straight (no special features) bond can be used as the interest rate. ? If the firm is rated, use the rating and a typical default spread on bonds with that rating to estimate the cost of debt. ? If the firm is not rated, – and it has recently borrowed long term from a bank, use the interest rate on the borrowing or – estimate a synthetic rating for the pany, and use the synthetic rating to arrive at a default spread and a cost of debt. Estimating Weight Average Cost of Capital ? Equity – Cost of Equity = 5% + (%) = % – Market Value of Equity = $ billion – Equity/(Debt+Equity ) = % ? Debt – Aftertax Cost of debt = 6% () = % – Market Value of Debt = $ billion – Debt/(Debt +Equity) = % ? Cost of Capital = % () + % () = % Average cost of capital in China ? Following is the average estimated cost of capital for 521 Chinese public panies year Inflation rate Cost of debt Cost of equity Cost of capital Real cost of equity 1997 % % % % % 1998 % % % % % 1999 % 6% % % % 2021 % 6% % % % 2021 % 6% % % % Cost of capital in selected countries (19982021) country Cost of capital inflation Real cost of capital . % % % China % % 7% India % % % Japan % % % Brazil % % % Economic Value Added (EVA) ? EVA is a newly developed method to assess firm performance ? Traditional ways to evaluate firm performance – Financial ratios(ROE) – Cost of capital ? Formula for EVA [ROAWACC]*total capital ? EVA can be viewed as earnings after capital costs. Economic Value Added (EVA) ? Advantages for using EVA – EVA is a dollar value, it can measure the incremental value the new project can add to the firm. – EVA is riskadjusted benchmark, theoretically linked to capital market ? Disadvantages for using EVA – EVA focus on current earnings – EVA may increase the shortsightedness of managers EVA for International Trade Corporation ? Assuming following figures EBIT=, Tc=40%, WACC=11%, total capital=20billion EVA=(ROAWACC)*total capital =EBIT(1 Tc)WACC*total capital =*()11%*20 =700 millio
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