Chapter 14国际金融概要1.ppt

page388 5.b Ke= Krf + βj(km - krf) βj=1.4 Krf=2.0% Km=? Km=5.5% Ke=2.0%+1.4(5.5%-2.0%)=6.9% page388 5.b Equity risk premium=km-krf using arthmetic mean Km=4.8%+2.0%=6.8% Equity risk premium=4.8 Krf=2.0% The same way to calculate Ke=2.0%+1.4(6.8%-2.0%)=8.72% a. define market segmentation capital market segmentation is a financial market imperfection caused mainly by government constraints, institutional practices, and investor perceptions. b. what are the six main causes of market segmentation? Asymmetric information between domestic and foreign-based investors Lack of transparency High securities transaction costs Foreign exchange risks Political risks Corporate governance differences c.what are the main disadvantages for a firm to be located in a segmentation market? Firm must define a strategy to attract international portfolio investors and thereby escape the constraints of its own illiquid or segmented national market. 9.Market liquidity and segmentation effects. What is the effect of Market liquidity and segmentation on a firm’ cost of capital? The degree to which capital markets are illiquid or segment has an important influence on a firm’s marginal cost of capital and thus on its weighted average cost of capital. The marginal cost of capital is the weighted average cost of the next currency unit raised. This is illustrated in Exhibit 14.7, which shows the transition from a domestic to a global marginal cost of capital. Wang Zhihang, Jin Zhenxiong, Tang Pan, Zhang Haodong The Global Cost and Availability of Capital 1.Global integration has given many firms access to new and cheaper sources of funds beyond those available in their home markets. What are the dimensions of a strategy to capture this lower cost and greater availability of capital? A firm that must source its long-term debt and equity in a lowly illiquid domestic securities market will probably have a relatively low cost of capital and will face g