金融經(jīng)濟(jì)學(xué)costofcapital課件-文庫(kù)吧資料
2024-09-07 06:15本頁(yè)面
【正文】 ions of MM, ? If the pany undertakes a new investment project with same risk as the rest of the pany, the change in value is: ( * ) )1( IBTIE B I TTIV CCL ????????? ?BTE B I TTBTVV CCCUL ????? ?)1(Corporate Finance 4 WACC ? The new investment is financed with debt or equity or both ? The change in value can also be seen from the liability side: nn BSI ?????IBIBISISIV nonoL??????????????Corporate Finance 5 WACC ? If ?Bo = 0, and using the fact that ?I ? ?Sn ??Bn ? The project adds value for the shareholders if 1????? ????????? ISI BSISIVonnoL( * * ) 1010 ??????????????? IVIVISIS LLooCorporate Finance 6 WACC ? Using (**) in (*): ? If we assume that there is a target capital structure and therefore that ?B/?I = D/(D+E), the term is the WACC ????????????????????????IBTIE B I TTIBTIE B I TTIVCCCCL 1)1(1)1( ???????? ??? IBT C1?Corporate Finance 7 Derivation: ?????????????????????????????????????????????????????????????DEDTrMPEDDTMPrEDDTrMPEDDTMPEDDMPEDErEDDTrEDErEDDMPEDTEDEMPEDErEDErEDDTrEDDMPEDTrEDErTEDDMPrEDErTEDDrEDErTEDDw a c cUUUffUUUfffUUfffUffEffEf1)1()))1(1(()1()()1()1(?????????Corporate Finance 8 WACC – lessons ? Notice that the standard WACC is a by product of MM, and therefore is relies on the same assumptions ? Notice also there is something intrinsically contradictory in the way it is often applied: ? You start assuming a constant debt level ? Then you assume a target debt ratio ? When the debt ratio is assumed constant, the WACC formula ought to be different Corporate Finance 9 MilesEzzel WACC: dynamic debt ? If we assume the debt ratio is constant, the WACC formula is ? And the formula for relevering betas is CD TrEDDW A C C??? ? 1 VS SD ?? ?????? ??Corporate Finance 10 Cost of equity: CAPM ? The discount rate for risky investments (expected return) covers: ? The time value of money ? A risk premium ? E(ri) = rf +?i(E(rm) rf) ? This is the most used method to calculate costs of equity ? Alternative: APT (see book for details if interested) Corporate Finance 11 Alternative: Dividend Growth Model ? Gordon?s growth model: ? Thus: grd ivEP ??Pd ivgrE ??Corporate Finance 12 Applying it: ? Need dividend yield and growth rate: ? use analysts? forecasts ? use the plowback ratio formula: g = b x ROE, where b is the retention ratio Note: this ?g? is the socalled ?sustainable growth rate? Corporate Finance 13 Pitfalls ? The dgrowth model makes a number of assumptions: ? constant growth rate ? constant dividend yield ? The validity of the model depends on the validity of these assumptions Corporate Finance 14 Cost of Debt ? The rate of return that debtholders demand to hold the debt ? Remember: it is the expected return and not the promised one ? For highrated bonds, promised is probably a good proxy Corporate Finance 15 Discount Rate for Debt ? In practice: ? Rate on new or recent borrowings ? Yield on parable bonds ? Both are measures of promised yield ? Expected return depends on: ? Probability of default ? Exposure at default ? Loss given default ? Expected loss on a loan is: ? PD x EAD x LGD [These are the terms used by Basel II] Corporate Finance 16 Discount Rate for Debt ? Same logic can be used to calculate expected returns ? Assuming EAD = 1: rD = (1 – PD) x i + PD x LGD ? . interest (i) is 14%, PD is 4%, recovery rate is 60%. Then, cost of debt is: rD = x 14% + x 40% = % Corporate Finance 17 Discount rate for debt ? Alternative ways: ? CAPM:
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