公司财务管理-香港城市大学

ByDr.XuepingWuCityUniversityofHongKongApril2012~efxpwu/CorporateFinancialManagement--CapitalBudgeting,CostofCapital&FirmValuation--ManagingCapitalforInvestment,FinancingandOperation1.CapitalBudgeting•Afirmhasexistingandfutureprojects•Goodmanagersmaintainandlaunchgoodprojects•Whataregoodprojects?•Aprojectprovidesastreamoffuturecashflows•WeneedtheknowledgeoffinancetoshiftcashflowsacrosstimeDiscountedcashflows=Presentvaluefortoday’sdecisionmaking“Good”projects=highpresentvaluesProjectSelectionRules•NetPresentValue•PaybackPeriod•DiscountedPaybackPeriod•TheInternalRateofReturn•TheProfitabilityIndexTheNetPresentValue(NPV)Rule•NetPresentValue(NPV)=TotalPVoffuturecashflows-InitialInvestment•EstimatingNPV(threecomponents):(1)Estimatefuturecashflows(2)Estimatediscountrate(3)Estimateinitialcosts(investment)•NPV0MinimumAcceptanceCriteria:AcceptifNPV0•RankingCriteria:ChoosethehighestNPVExampleAccepttheprojectbecauseNPV0.0123$50$100$150-$200(Investment)23$50$100$150200(115%)(115%)(115%)$17.72NPVThePaybackPeriodRule•Howlongdoesittaketheprojectto“payback”itsinitialinvestment?•PaybackPeriod=numberofyearstorecoverinitialinvestment•MinimumAcceptanceCriteriaissetbymanagement•RankingCriteriaisalsosetbymanagement•Example:InitialInvestment=$200ProjectA:ProjectB:CF(Year1)=$50CF(Year1)=$50;CF(Year2)=$150CF(Year2)=$100;CF(Year3)=$100CF(Year3)=$250PaybackPeriod(A)PaybackPeriod(B)=2Years=2+(200-150)/250=2.2YearsTheDiscountedPaybackPeriodRule•Howlongdoesittaketheprojectto“payback”itsinitialinvestmenttakingthetimevalueofmoneyintoaccount?•Example:InitialInvestment=$200,costofcapital=15%ProjectA:ProjectB:PV(50)=50/1.15=43.48PV(50)=50/1.15=43.48PV(150)=150/1.152=113.42PV(100)=100/1.152=75.61PV(100)=100/1.153=65.75PV(250)=250/1.153=164.38TotalPV(A)=$222.65TotalPV(A)=$283.47DiscountedPaybackPeriod(A)DiscountedPaybackPeriod(B)=2+(200-43.48-113.42)/65.75=2+(200-43.48-75.61)/131.50=2.66years=2.49yearsTimevalueofmoneymatters!TheInternalRateofReturn(IRR)Rule•IRR:thespecialdiscountratethatsetsNPVtozero•MinimumAcceptanceCriteria:AcceptiftheIRRexceedstherequiredreturn.•RankingCriteria:SelectalternativewiththehighestIRR•Example:0123$50$100$150-$20032)1(150$)1(100$)1(50$2000IRRIRRIRRNPVTheIRRforthisprojectis19.44%TheProfitabilityIndex(PI)Rule•PI=PV(allfuturecashflows)dividedbyinitialinvestment•MinimumAcceptanceCriteria:AcceptifPI1•RankingCriteria:SelectalternativewithhighestPI•Example:InitialInvestment=$200ProjectA:PV=$222.65,soPI=222.65/200=1.11ProjectB:PV=$283.47,soPI=283.47/200=1.42WorkSheetforCashFlows(CF)Year0Year1Year2Year3Year4Year5(1)Sales(Revenues)$100.0$163.00$249.72$212.20$129.90(2)Operatingcosts-50.00-88.00-145.20133.10-87.84(3)Taxes-10.20-14.69-29.01-22.98-10.38(4)OperatingCF(1)–(2)–(3)39.8060.5175.5156.1231.68(5)Investments–260.–6.32–8.653.75192.98(6)CF[(4)+(5)]–260.39.8054.1966.8659.87224.6605.588,51$)10.1(66.224$)10.1(87.59$)10.1(86.66$)10.1(19.54$)10.1(80.39$260$5432NPVNPV2.CostofCapital•Capital=Debt+Equity(oractuallyallfinancingmeansincludingconvertiblebondsandwarrants)•CostofDebt=InterestRate(s)Debt-rating(S&P:AAA,AA,…,BBB,…Junk..)•CostofEquity=Requiredrateofreturn•CapitalStructure(mixoffinancingmeans)•WACC=WeightedAverageofCostofCapitalAverageReturnandRisk•AverageReturnsandStandardDeviationforEquities,Bonds,andBillsintheUS.,1900–2006(over106yrs)Assetclasseswithgreatervolatility(std.Dev.)payhigheraveragereturns.Averagereturnonstocksismorethandoubletheaveragereturnonbonds,butstocksare2.5timesmorevolatile.HistoricalReturns,1926-2007Source:©Stocks,Bonds,Bills,andInflation2008Yearbook™,IbbotsonAssociates,Inc.,Chicago(annuallyupdatesworkbyRogerG.IbbotsonandRexA.Sinquefield).Allrightsreserved.AverageStandardSeriesAnnualReturnDeviationDistributionLargeCompanyStocks12.3%20.0%SmallCompanyStocks17.132.6Long-TermCorporateBonds6.28.4Long-TermGovernmentBonds5.89.2U.S.TreasuryBills3.83.1Inflation3.14.20%–90%+90%CostofEquity•TradeoffbetweenriskandreturnforstocksDiversificationthroughholdingaportfolioIntuition:Don’tputalleggsinonebasket!TotalRiskvs.PricedRiskExpectedreturn=requiredrateofreturn•CapitalAssetPricingModel(CAPM)Highrisk,high(required)returnDiversificationandBetaRisk•Totalrisk=SystematicRisk+UniqueRiskUniqueriskcanbediversifiedawayinaportfolioSystematicriskarisesfromthewholeeconomy.•Youshouldnotpayanyriskpremiumforuniqueriskbecauseitwilloffsetitselfautomaticallyinagroupofdifferentfirms(portfolio)Systematicriskispricedbutuniqueriskisn’t.Betarisk(b)measuressystematicriskorafirm’sreturnsensitivitytothemarketreturnovertime.bi=Cov(rm,ri)/Var(rm)CapitalAssetPricingModel•CAPM:E(ri)=rf+[E(rm)-rf]biforfirmi(anyfirm)Example:FirmA:20%=2%+[15%-2%]x1.385FirmB:10%=2%+[15%-2%]x0.615CapitalBudgeting&ProjectRiskVariousprojectscanhavedifferentlevelsofbetariskAfirmthatreliesononehurdlerate(discountrate)forallprojectsmayriskover-andunder-rejectionofprojects!ProjectIRRBetariskSMLrfbFIRMIncorrectlyrejectedpositiveNPVprojectsIncorrectlyacceptednegativeNPVprojectsHurdlerate)(FMFIRMFR