Chapter_09Capital Budgeting and Risk(公司理财原理,Brealey Myers).ppt

Slides by Matthew Will Topics Covered Company and Project Costs of Capital Measuring the Cost of Equity Capital Structure and COC Discount Rates for Intl. Projects Estimating Discount Rates Risk and DCF Company Cost of Capital A firm’s value can be stated as the sum of the value of its various assets Company Cost of Capital Company Cost of Capital A company’s cost of capital can be compared to the CAPM required return Measuring Betas The SML shows the relationship between return and risk CAPM uses Beta as a proxy for risk Other methods can be employed to determine the slope of the SML and thus Beta Regression analysis can be used to find Beta Measuring Betas Measuring Betas Measuring Betas Measuring Betas Measuring Betas Measuring Betas Beta Stability Company Cost of Capitalsimple approach Company Cost of Capital (COC) is based on the average beta of the assets The average Beta of the assets is based on the % of funds in each asset Company Cost of Capitalsimple approach Company Cost of Capital (COC) is based on the average beta of the assets The average Beta of the assets is based on the % of funds in each asset Example 1/3 New Ventures B=2.0 1/3 Expand existing business B=1.3 1/3 Plant efficiency B=0.6 AVG B of assets = 1.3 Capital Structure Capital Structure - the mix of debt equity within a company Expand CAPM to include CS R = rf + B ( rm - rf ) becomes Requity = rf + B ( rm - rf ) Capital Structure COC Capital Structure COC Union Pacific Corp. Union Pacific Corp. Union Pacific Corp. International Risk Asset Betas Asset Betas Risk,DCF and CEQ Risk,DCF and CEQ Example Project A is expected to produce CF = $100 mil for each of three years. Given a risk free rate of 6%, a market premium of 8%, and beta of .75, what is the PV of the project? Risk,DCF and CEQ Example Project A is expected to produce CF = $100 mil for each of three years. Given a risk free rate of 6%, a market premium of 8%, and beta of .75, what is the PV of the project? Ri