财务管理-社团的财政讲义-4.ppt

Weighted Average Cost of Capitalwithout taxes WACC = rdebt (D) + requity (E) (V) (V) Factors in CS CB Decision Bankruptcy Risk Costs (previous slides) Signaling Hypothesis Bondholder Wealth Expropriation Theory Agency Costs The Principal Agent Problem Agent Problems Reduced effort Perks Empire building Entrenching investment Avoiding risk Agency Incentive Issues Monitoring - Reviewing the actions of managers and providing incentives to maximize shareholder value. Free Rider Problem - When owners rely on the efforts of others to monitor the company. Compensation - How to pay managers so as to reduce the cost and need for monitoring and to maximize shareholder value. Factors in CS CB Decisioncontinued Cash Flow estimates Market Values Projects may appear to have positive NPVs because of forecasting errors e.g. some acquisitions result from errors in a DCF analysis Don’t make investment decisions on the basis of errors in your DCF analysis. Start with the market price of the asset and ask whether it is worth more to you than to others. Factors in CS CB Decisioncontinued Measuring performance MVA EVA Residual income Economic Income CFROI MVA Market Value Added MVA = Market Cap year 2 – Market cap year 1 Residual Income EVA Techniques for overcoming errors in accounting measurements of performance. Emphasizes NPV concepts in performance evaluation over accounting standards. Looks more to long term than short term decisions. More closely tracks shareholder value than accounting measurements. EVA by Stern and Stewart out of Boston Residual Income EVA Residual Income EVA Residual Income EVA Residual Income EVA Economic Profit Economic Profit Message of EVA + Managers are motivated to only invest in projects that earn more than they cost. + EVA makes cost of capital visible to managers. + Leads to a reduction in assets employed. - EVA does not measure present value - Rewards quick paybac