资本控制及WACC的计算.pptVIP

Flotation costs Flotation costs depend on the risk of the firm and the type of capital being raised. The flotation costs are highest for common equity. However, since most firms issue equity infrequently, the per-project cost is fairly small. We will frequently ignore flotation costs when calculating the WACC. Ignoring floatation costs, what is the firm’s WACC? WACC = wdkd(1-T) + wpkp + wcks = 0.3(10%)(0.6) + 0.1(9%) + 0.6(14%) = 1.8% + 0.9% + 8.4% = 11.1% What factors influence a company’s composite WACC? Market conditions. The firm’s capital structure and dividend policy. The firm’s investment policy. Firms with riskier projects generally have a higher WACC. Should the company use the composite WACC as the hurdle rate for each of its projects? NO! The composite WACC reflects the risk of an average project undertaken by the firm. Therefore, the WACC only represents the “hurdle rate” for a typical project with average risk. Different projects have different risks. The project’s WACC should be adjusted to reflect the project’s risk. Risk and the Cost of Capital What are the three types of project risk? Stand-alone risk Corporate risk Market risk How is each type of risk used? Market risk is theoretically best in most situations. However, creditors, customers, suppliers, and employees are more affected by corporate risk. Therefore, corporate risk is also relevant. Problem areas in cost of capital Depreciation-generated funds Privately owned firms Measurement problems Adjusting costs of capital for different risk Capital structure weights How are risk-adjusted costs of capital determined for specific projects or divisions? Subjective adjustments to the firm’s composite WACC. Attempt to estimate what the cost of capital would be if the project/division were a stand-alone firm. This requires estimating the project’s beta. Finding a divisional cost of capital:Using similar stand-alone firms to estimate a project’s cost of capital Comparison firms have t