.201 ( 1/2558) OUTLINE: (5) (Capital Structure) (Cost of Capital) (Financial Structure) (Financial Structure)

Transcription

1 OUTLINE:.201 ( 1/2558) (5) (Capital Structure) (Cost of Capital) ( ) : (Component Cost) : (Weight Average Cost of Capital WACC) : (Marginal Cost of Capital) 1 2 (Financial Structure) Debt to Total Assets Ratio = % (Financial Structure) Debt to Total Assets Ratio = % 1,500 6,500 8,000 2,000 1,200 4,800 8,

2 (Capital Structure) (Optimal Capital Structure Target Capital Structure)?? (Capital Structure) : 1,200 20% 4,800 80% 6, % 20% 80% : 1. Minimizing Weighted Average Cost of Capital (WACC) 2. Maximizing Market Value of Common Stock 2? (All Equity Financing) 7 8

3 Cost of Capital % 12% 4.8% Min. WACC Cost of Equity, ks WACC % After Tax Cost of debt, kd(1-t) Debt/ Total Assets% 9 10 ) 1. (Business Risk) 2. (Tax Position) 3. (Financing Flexibility) 4. (Management Conservatism) 5. (Lender and Rating Agency Attitude) 11 12

4 ) 6. (Control) 7. (Assets Structure) ) 8. (Growth Rate) 9. (Profitability) ROE 10. (Capital Market Condition) (Cost of Capital) 2 : 1. (Investors) 2. (Managers) (Component Costs) Cost of Debt kd Cost of Preferred Stock kp Cost of Equity Cost of Retained Earnings ks Cost of Newly Issued Common Stock k e 15 16

5 (Weighted Average Cost of Capital) WACC k MCC (Marginal Cost of Capital) (WACC) (k d ) : ( ) ( ) (Minimum Loan Rate MLR) (Minimum Overdraft Rate MOR) (Minimum Retail Rate MRR) : %

6 (Par) (Maturity Value) (Coupon Rate) discount rate (Flotation Cost = f% = 0%)? : 3 10% 10,000 (P0) : 1. 9, , , ,000 3 = 10, P0 1,000 1,000 1,000 10,000 : (P0) (k) discount rate (PVCI) k PVCI = P0 PVCO k = = IRR Internal Rate of Return = YTM Yield to Maturity k 23 24

7 : 1 9, = P 0 k PVCI = P 0 1,000(PVIFA k%, 3 ) + 10,000(PVIF k%, 3 ) = 9, (Trial and Error) k k = 12% ( ) 1,000(2.4018) + 10,000(0.7118) = 9, , ,118 = 9, , = 9, k = 12% = IRR = YTM = kd : 2 10, = P0 k PVCI = P0 1,000(PVIFA k%, 3 ) + 10,000(PVIF k%, 3 ) = 10, (Trial and Error) k k = 7% ( ) 1,000(2.6243) + 10,000(0.8163) = 10, , ,163 = 10, , = 10, k = 7% = IRR = YTM = kd : 3 10,000 = P0 k PVCI = P0 1,000(PVIFA k%, 3 ) + 10,000(PVIF k%, 3 ) = 10,000 (Trial and Error) k k = 10% ( Par k...) 1,000(2.4869) + 10,000(0.7513) = 10,000 2, ,513 = 10,000 10,000 = 10,000 k = 10% = IRR = YTM = kd : k Coupon Rate P0 = Par AT Par kd = Coupon rate P0 Par AT Premium kd Coupon rate P0 Par AT Discount kd Coupon rate 27 28

8 (Flotation Cost) P 0 P n P n = = P 0 (1 f) f = % (Flotation Cost) 1: P 0 = 9, P n = 9, (1 0.05) = 9, : P 0 = 10, P n = 10, (1 0.05) = 10, : P 0 = 10,000 P n = 10,000 (1 0.05) = 9,500 k PVCI = P n (Flotation Cost) (Flotation Cost) 1 9, = P 0 f = 5% k PVCI = P n 1,000(PVIFA k%, 3 ) + 10,000(PVIF k%, 3 ) = 9, (Trial and Error) k k = 14% (.. 14% ) 1,000(2.3216) + 10,000(0.6750) = 9, , ,750 = 9, ,071.6 = 9, k = 14% = k d YTM 2 10, = P n f = 5% k PVCI = P n 1,000(PVIFA k%, 3 ) + 10,000(PVIF k%, 3 ) = 10, (Trial and Error) k k = 9% (.. 9% ) 1,000(2.5313) + 10,000(0.7722) = 10, , ,722 = 10, , = 10, k = 9% = k d YTM 31 32

9 (Flotation Cost) 3 10,000 = P 0 f = 5% k PVCI = P n 1,000(PVIFA k%, 3 ) + 10,000(PVIF k%, 3 ) = 9,500 (Trial and Error) k k = 12% (.. 12% ) 1,000(2.4018) + 10,000(0.7118) = 9,500 2, ,118 = 9,500 9,519.8 = 9,500 k = 12% = k d YTM f = 5% P0 = Pn = Kd = ( ) 9, % 9, % 10, % 10, % 10, % 9, % k d premium discount amortize k d = P 0 P n kd : C = Par P0 = (Premium Discount) n ( ) (amortization discount premium) 0.5P Par 35 36

10 : 5,000 8% 6 5 5,400 4% = 5,000 *.08 = = 400 / 2 = 200 = 5 * 2 = 10 Pn = P0 (1 f) = 5,400 (1 0.04) = 5,184 : kd = ,000 5, (5,184) (5,000) = (-18.4) 2, ,500 = = * 100 = 3.57% 6 5,092 = 3.57 * 2 = 7.14% k d k d (1-T) = = (Cost of Preferred Stock = k p ) = 8% 6.25 Perpetuity 39 40

11 (Cost of Preferred Stock = k p ) D p = ( ) (perpetuity cash flows) k p = P 0 = = PVCI perpetuity (f = 0%) P 0 = D p k p = D p k p P 0 par premium discount (k p ) P o = Par AT Par k p = Dividend rate P o Par AT Premium k p Dividend rate P o Par AT Discount k p Dividend rate (kp) : (Par) % (P0) : = 4.5%(200) = 9 = D p P 0 Kp = 170 (At discount) = 9 / 170 =.053 * 100 = 5.3% 200 (At Par) = 9 / 200 =.045 *100 = 4.5% 225 (At Premium) = 9 / 225 =.040 * 100 = 4.0% (kp) f = 4% = P n = P 0 (1-f) P 0 ( ) P n ( ) k p (%) 170 =170(1-0.04) = = 9 / =.055 * 100 = 5.5% 200 = 200(1-0.04) = 192 = 9 / 192 =.047 *100 = 4.7% 225 = 225(1 0.04) = 216 = 9 / 216 =.042 *100 = 4.2% 43 44

12 (Cost of Common Equity) (Not tax deductible) (k p ) 2 : 1. (issuing new shares) External Equity 2. (Retained Earnings) Internal Equity (Cost of Common Equity)?? (ks) (ke) (ks) 2 : Bond Yield plus Risk Premium Approach k s = Bond Yield + Risk Premium Discounted Cash Flows (DCF) Approach 47 48

13 (ks) 1. Bond Yield plus Risk Premium Approach k s = Bond Yield + Risk Premium ( ) ( ) (Bond Yield) (ks) 2. Discounted Cash Flow (DCF) Approach (P 0 ) (k s ) discount rate P 0 = D 1 + D D (1+ks) 1 (1+ks) 2 (1+ks) (ks) P 0 = D 0 (1+g) 1 + D 0 (1+g) 2 +..D 0 (1+g) (1+ks) 1 P 0 = D 1 k s g k s = D 1 + g P 0 (1+ks) 2 (1+ks) g = k s : Discounted Cash Flow (DCF) Approach DCF Gordon Model k s > g P 0 = D 1 k s -g k s = D 1 + g P

14 (k s ) 2 : 1. (Dividend Yield) =D 1 / P 0 2. (Capital Gain Yield) = g (g) : 1 (Growth Rate = g) (ROE) (RR) (DPR) : g = (Retention Rate) (ROE) = (1 Dividend Payout Ratio) (ROE) (Sustainable Growth Rate) (Target Capital Structure) (g) ROE 18.0% 40.0% 60.0% g = Retention Ratio * ROE = (1 Dividend Payout Ratio) * ROE = (1 0.40) * 18.0% = 10.8% 10.8% (g): 2 Discounted Cash Flows (DCF) 2549 = (FVIF g%, 5 ) = 8.81 A-3 n = 5 FVIF = g = 12% 5.00 = 8.81(PVIF g%, 5 ) A-1 g = 12%

15 (ks) (D 1 = 3 ) 5% k s = D 1 /P 0 + g = 3 / = = 0.15 = 15% 15% (k e ) (k s ) (P n ) k e = D 1 + g P n P n = P 0 (1 f) (k e ) 50 6% 3.76 ( D 0 ) 7.5% (k e ) k e = D 1 + g = D 0 (1+g) + g P n P 0 (1-f) = 3.76 (1+.075) = (1-.06) 47 = =.161 = 16.1% (Component Costs) k d = k p = k s = k e = 59 60

16 (Weighted Average Cost of Capital) WACC (After-Tax Component Costs = k i ) (Weight = w i ) (Target Capital Structure) WACC = k = w d k d (1-T) + w p k p + w s k s 3 w d, w p w s WACC WACC WACC : w i k i Market Weight? Book Weight? Current Cost? Historical Cost WACC: w i Market Value Weight k i Current Cost WACC : : = 25% : 15% : 60% = 8.5% = 12.0% = 14.2% = 16.0% = 25%

17 WACC 400 : WACC 2 : WACC WACC 1 w i WACC =.25(8.5)(1-.25) +.15(12.0) +.60(14.2) = = 11.91% WACC 11.91% k i WACC 2 w i WACC =.25(8.5)(1-.25) +.15(12.0) +.60(16.0) = = 12.99% WACC 12.99% k i 67 68

18 WACC % WACC 2 w s + w e 60% 0.60 (Marginal Cost of Capital MCC) (WACC) 2 WACC 11.91% WACC 12.99% 2 WACC 2 Break Point WACC (MCC) Break Point in MCC (MCC 1 ) (MCC 2 ) Break Point Break Point Break Point in MCC 400 : / 0.60 = 150 WACC 11.91% 71 72

19 Break Point Break Point 90 = B B 60% : 0.60 B = 90 B = 90 = Retained Earnings Break Point Break Point: Retained Earnings BP Break Point RE = Equity = 90 = WACC = MCC 1 = 11.91% MCC Schedule 250 : WACC = MCC 2 = 12.99% MCC Schedule (MCC) WACC % MCC 1 =11.91% MCC 2 =12.99% ( ) 75 76