金融经济学costofcapital课件.ppt

Cost of Capitaland Investment decisions
Under the assumptions of MM,
If pany undertakes a new investment project with same risk as the rest of pany, the change in value is:
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The new investment is financed with debt or equity or both
The change in value can also be seen from the liability side:
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If DBo = 0, and using the fact that DI = DSn +DBn
The project adds value for the shareholders if
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Using (**) in (*):
If we assume that there is a target capital structure and therefore that DB/DI = D/(D+E), the term
is the
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Derivation:
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– lessons
Notice that the standard is a by product of MM, and therefore is relies on the same assumptions
Notice also there is something intrinsically contradictory in the way it is often applied:
You start assuming a constant debt level
Then you assume a target debt ratio
When the debt ratio is assumed constant, the formula ought to be different
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Miles-Ezzel : dynamic debt
If we assume the debt ratio is constant, the formula is
And the formula for relevering betas is
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Cost of equity: CAPM
The discount rate for risky investments (expected return) covers:
The time value of money
A risk premium
E(ri) = rf +bi(E(rm) - rf)
This is the most used method to calculate costs of equity
Alternative: APT (see book for details if interested)
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