资本资产定价模型WACC

资本资产定价模型WACC课件

WACC and Debt PolicyOptimal Capital Structure?

资本资产定价模型WACC课件

M&M (Debt Policy Doesn’t Matter) Modigliani & Miller (Proposition I)– When there are no taxes and capital markets are perfect, the market value of a company does not depend on its capital structure.The Value of the firm does not change with debt:

VL = VU

资本资产定价模型WACC课件

Return on Assets (wacc)No Taxesexpected operating income Expected return on assets ra market val ue of all securities

D E rA rD rE D E D E Note: rA = WACC (with no taxes)

资本资产定价模型WACC课件

M&M Proposition IID rE rA rA rD EThe cost of equity capital increases with financial leverage – due to the increase in Risk!

V = D + EThese should be Market values!

资本资产定价模型WACC课件

r

M&M Proposition IIrE

rA = WACC rDRisk free debt Risky debt

D E

资本资产定价模型WACC课件

Leverage and ReturnsImpact on Beta

D E BA BD BE D E D E

D BE BA B A BD E

资本资产定价模型WACC课件

Leverage and ReturnsImpact on BetaIf the Beta of Debt is assumed to be Zero BD = 0 The Beta of the Levered Firm is Equal to the Beta of the Unlevered Firm (or Asset Beta) times One plus the Debt-to-Equity Ratio

D BL BU (1 ) ENote: Equity betas are levered betas and asset betas are unlevered betas (L=E and U=A).

资本资产定价模型WACC课件

WACC (no taxes) WACC is the traditional view of capital structure, risk and return.

D E WACC rA rD rE V V

资本资产定价模型WACC课件

Capital Structurewith taxesPV of Tax Shield =(assume perpetuity)

D x rD x Tc

= D x Tc

rD

Firm Value = Value of All Equity Firm + PV Tax Shield

VL = VU + TC x D MM Proposition I with Corporate Taxes

资本资产定价模型WACC课件

MM Prop. I with TaxesMarket Value of The FirmValue of levered firm PV of interest tax shields

Value of unlevered firm Optimal amount of debt

Debt

资本资产定价模型WACC课件

MM with Corporate TaxesMM Proposition II with Corporate Taxes

D rE r0 (1 TC )( r0 rD ) Er0 = the return on the all equity financed firm (the unlevered firm or the return on the assets of the firm)

资本资产定价模型WACC课件

Debt and TaxesImpact on BetaIf the Beta of Debt is assumed to be Zero BD = 0

D BL BU 1 (1 TC ) ) E Remember, βL is the equity beta for a firm with leverage, and βU is the beta for the firm with NO debt

资本资产定价模型WACC课件

MM with Taxes: WACC rrE r0WACC

rDD V

资本资产定价模型WACC课件

Financial DistressCosts of Financial Distress - Costs arising from bankruptcy or distorted business decisions before bankruptcy. Market Value = Value if all Equity Financed + PV Tax Shield - PV Costs of Financial Distress

资本资产定价模型WACC课件

Financial Distress Maximum value of firmMarket Value of The FirmCosts of financial distress PV of interest tax shields

Value of levered firm

Value of unlevered firm Optimal amount of debt

Debt

资本资产定价模型WACC课件

WACC with TaxesImportant: The WACC Formula

D E WACC rD (1 TC ) rE V V

资本资产定价模型WACC课件

Weighted Average Cost of Capital(with costs of financial distress)

r rEWACC

rDOptimal amount of debt

D V

资本资产定价模型WACC课件

Costs of

Debt Financial Distress Costs Personal Tax Disadvantage of Debt Agency Costs Information Costs (or Benefits) of Debt The Pecking Order Theory