彼得羅斯公司理財(cái)cap(5)-展示頁(yè)
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【正文】 capital ? Understand the impact of flotation costs on capital budgeting 132 Chapter Outline The Cost of Equity Capital Estimating the Cost of Equity Capital with the CAPM Estimation of Beta Beta, Covariance and Correlation Determinants of Beta Dividend Discount Model Cost of Capital for Divisions and Projects Cost of Fixed Ine Securities The Weighted Average Cost of Capital Estimating Eastman Chemical’s Cost of Capital Flotation Costs and the Weighted Average Cost of Capital 133 Where Do We Stand? ? Earlier chapters on capital budgeting focused on the appropriate size and timing of cash flows. ? This chapter discusses the appropriate discount rate when cash flows are risky. 134 Invest in project The Cost of Equity Capital Firm with excess cash Shareholder’s Terminal Value Pay cash dividend Shareholder invests in financial asset Because stockholders can reinvest the dividend in risky financial assets, the expected return on a capitalbudgeting project should be at least as great as the expected return on a financial asset of parable risk. A firm with excess cash can either pay a dividend or make a capital investment 135 The Cost of Equity Capital ? From the firm’s perspective, the expected return is the Cost of Equity Capital: )( FMiFi RRβRR ???? To estimate a firm’s cost of equity capital, we need to know three things: 1. The riskfree rate, RF FM RR ?2. The market risk premium, 2,)(),(MMiMMii σσRV arRRC ovβ ??3. The pany beta, 136 Example ? Suppose the stock of Stansfield Enterprises, a publisher of PowerPoint presentations, has a beta of . The firm is 100% equity financed. ? Assume a riskfree rate of 5% and a market risk premium of 10%. ? What is the appropriate discount rate for an expansion of this firm? )( FMiF RRβRR ???%%5 ???R%30?R137 Example Suppose Stansfield Enterprises is evaluating the following independent projects. Each costs $100 and lasts one year. Project Project b Project’s Estimated Cash Flows Next Year IRR NPV at 30% A $150 50% $ B $130 30% $0 C $110 10% $ 138 Using the SML An allequity firm should accept projects whose IRRs exceed the cost of equity capita
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