thecostofcapital(英文版)(ppt40頁)(參考版)
2025-02-19 07:52本頁面
【正文】 2023 by Harcourt, Inc. All rights reserved. How does the division’s market risk pare with the firm’s overall market risk? ?Division WACC = % versus pany WACC = %. ?Indicates that the division’s market risk is greater than firm’s average project. ?“Typical” projects within this division would be accepted if their returns are above %. 10 41 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Find the division’s market risk and cost of capital based on the CAPM, given these inputs: ?Target debt ratio = 40%. ?kd = 12%. ?kRF = 7%. ?Tax rate = 40%. ?betaDivision = . ?Market risk premium = 6%. 10 39 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Methods for Estimating a Project’s Beta 1. Pure play. Find several publicly traded panies exclusively in project’s business. Use average of their betas as proxy for project’s beta. Hard to find such panies. 10 37 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. How is each type of risk used? ?Market risk is theoretically best in most situations. ?However, creditors, customers, suppliers, and employees are more affected by corporate risk. ?Therefore, corporate risk is also relevant. 10 35 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Divisional Cost of Capital R a t e o f R e t u r n( % )W A C CP r o j e c t HD i v i s i o n H ’ s W A C CR i s kP r o j e c t LC o m p o s i t e W A C Cf o r F i r m A1 3 . 07 . 01 0 . 01 1 . 09 . 0D i v i s i o n L ’ s W A C C0 R i s kLR i s kA v e r a g eR i s kH10 33 Copyright 169。 2023 by Harcourt, Inc. All rights reserved. Should the pany use the posite WACC as the hurdle rate for each of its projects? ?NO! The posite WACC reflects the risk of an average 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. What factors influence a pany’s posite WACC? ?Market conditions. ?The firm’s capital structure and dividend policy. ?The firm’s investment policy. Firms with riskier projects gener
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