财务管理第十四章课件

Chapter14CostofCapitalMcGraw-Hill/IrwinCopyright©2013byTheMcGraw-HillCompanies,Inc.Allrightsreserved.KeyConceptsandSkills•Knowhowtodetermineafirm’scostofequitycapital•Knowhowtodetermineafirm’scostofdebt•Knowhowtodetermineafirm’soverallcostofcapital•Knowhowtohandleflotationcosts•Understandpitfallsofoverallcostofcapitalandhowtomanagethem14-2ChapterOutline•TheCostofCapital:SomePreliminaries•TheCostofEquity•TheCostsofDebtandPreferredStock•TheWeightedAverageCostofCapital•DivisionalandProjectCostsofCapital•FlotationCostsandtheWeightedAverageCostofCapital14-3WhyCostofCapitalIsImportant•Weknowthatthereturnearnedonassetsdependsontheriskofthoseassets•Thereturntoaninvestoristhesameasthecosttothecompany•Ourcostofcapitalprovidesuswithanindicationofhowthemarketviewstheriskofourassets•Knowingourcostofcapitalcanalsohelpusdetermineourrequiredreturnforcapitalbudgetingprojects14-4RequiredReturn•Therequiredreturnisthesameastheappropriatediscountrateandisbasedontheriskofthecashflows•WeneedtoknowtherequiredreturnforaninvestmentbeforewecancomputetheNPVandmakeadecisionaboutwhetherornottotaketheinvestment•Weneedtoearnatleasttherequiredreturntocompensateourinvestorsforthefinancingtheyhaveprovided14-5CostofEquity•ThecostofequityisthereturnrequiredbyequityinvestorsgiventheriskofthecashflowsfromthefirmBusinessriskFinancialrisk•TherearetwomajormethodsfordeterminingthecostofequityDividendgrowthmodelSML,orCAPM14-6TheDividendGrowthModelApproach•StartwiththedividendgrowthmodelformulaandrearrangetosolveforREgPDRgRDPEE011014-7Example:DividendGrowthModel•Supposethatyourcompanyisexpectedtopayadividendof$1.50persharenextyear.Therehasbeenasteadygrowthindividendsof5.1%peryearandthemarketexpectsthattocontinue.Thecurrentpriceis$25.Whatisthecostofequity?%1.11111.051.2550.1ER14-8Example:EstimatingtheDividendGrowthRate•OnemethodforestimatingthegrowthrateistousethehistoricalaverageYearDividendPercentChange20081.23-20091.3020101.3620111.4320121.50(1.30–1.23)/1.23=5.7%(1.36–1.30)/1.30=4.6%(1.43–1.36)/1.36=5.1%(1.50–1.43)/1.43=4.9%Average=(5.7+4.6+5.1+4.9)/4=5.1%14-9AdvantagesandDisadvantagesofDividendGrowthModel•Advantage–easytounderstandanduse•DisadvantagesOnlyapplicabletocompaniescurrentlypayingdividendsNotapplicableifdividendsaren’tgrowingatareasonablyconstantrateExtremelysensitivetotheestimatedgrowthrate---anincreaseingof1%increasesthecostofequityby1%Doesnotexplicitlyconsiderrisk14-10TheSMLApproach•UsethefollowinginformationtocomputeourcostofequityRisk-freerate,RfMarketriskpremium,E(RM)–RfSystematicriskofasset,))((fMEfERRERR14-11Example-SML•Supposeyourcompanyhasanequitybetaof.58,andthecurrentrisk-freerateis6.1%.Iftheexpectedmarketriskpremiumis8.6%,whatisyourcostofequitycapital?RE=6.1+.58(8.6)=11.1%•SincewecameupwithsimilarnumbersusingboththedividendgrowthmodelandtheSMLapproach,weshouldfeelgoodaboutourestimate14-12AdvantagesandDisadvantagesofSML•AdvantagesExplicitlyadjustsforsystematicriskApplicabletoallcompanies,aslongaswecanestimatebeta•DisadvantagesHavetoestimatetheexpectedmarketriskpremium,whichdoesvaryovertimeHavetoestimatebeta,whichalsovariesovertimeWeareusingthepasttopredictthefuture,whichisnotalwaysreliable14-13Example–CostofEquity•Supposeourcompanyhasabetaof1.5.Themarketriskpremiumisexpectedtobe9%,andthecurrentrisk-freerateis6%.Wehaveusedanalysts’estimatestodeterminethatthemarketbelievesourdividendswillgrowat6%peryearandourlastdividendwas$2.Ourstockiscurrentlysellingfor$15.65.Whatisourcostofequity?UsingSML:RE=6%+1.5(9%)=19.5%UsingDGM:RE=[2(1.06)/15.65]+.06=19.55%14-14CostofDebt•Thecostofdebtistherequiredreturnonourcompany’sdebt•Weusuallyfocusonthecostoflong-termdebtorbonds•Therequiredreturnisbestestimatedbycomputingtheyield-to-maturityontheexistingdebt•Wemayalsouseestimatesofcurrentratesbasedonthebondratingweexpectwhenweissuenewdebt•ThecostofdebtisNOTthecouponrate14-15Example:CostofDebt•Supposewehaveabondissuecurrentlyoutstandingthathas25yearslefttomaturity.Thecouponrateis9%,andcouponsarepaidsemiannually.Thebondiscurrentlysellingfor$908.72per$1,000bond.Whatisthecostofdebt?N=50;PMT=45;FV=1000;PV=-908.72;CPTI/Y=5%;YTM=5(2)=10%14-16CostofPreferredStock•RemindersPreferredstockgenerallypaysaconstantdividendeachperiodDividendsareexpectedtobepaideveryperiodforever•Preferredstockisaperpetuity,sowetaketheperpetuityformula,rearrangeandsolveforRP•RP=D/P014-17Example:CostofPreferredStock•Yourcompanyhaspreferredstockthathasanannualdividendof$3.Ifthecurrentpriceis$25,whatisthecostofpreferredstock?•RP=3/25=12%14-18TheWeightedAverageCostofCapital•Wecanusetheindividualcostsofcapitalthatwehavecomputedtogetour“average”costofcapitalforthefirm.•This“average”istherequiredreturnonthefirm’sassets,basedonthemarket’sperceptionoftheriskofthoseassets•Theweightsaredeterminedbyhowmuchofeachtypeoffinancingisused14-19CapitalStructureWeights•NotationE=marketvalueofequity=#ofoutstandingsharestimespricepershareD=marketvalueofdebt=#ofoutstandingbondstimesbondpriceV=marketvalueofthefirm=D+E•WeightswE=E/V=percentfinancedwithequitywD=D/V=perc