公司理财.ppt

公司理财13868.ppt1 Chapter 4 Financing Theory 2 Section I: Cost of Capital 3 Cost of capital ? In corporate finance, the cost of capital is very important : ? Capital budgeting is based on the correct estimating of capital cost. ? The other important decisions also require the estimating of capital cost. ? In order to the maximum of corporate value, cost of capital must be minimum. 4 Cost of capital ? Think over: ? Cost of capital =? The opportunity cost of capital =? The required return of investors =? the discount rate of cash flow 5 Cost of capital ? The cost of capital is the opportunity cost of funds of the firm ’ s investors; It is the rate of return that could be earned in the capital markets with a similar amount of risk; ? It is also the return the firm must earn on its investment in order to satisfy the required rate of return of the firm ’ s investors. 6 Cost of capital ? So, remember the following concepts are equivalent: ? The cost of capital ? The opportunity of capital cost ? The require rate of return of investors ? The discount rate 7 Cost of capital ? Notice: ? Cost of capital depends on the risk of investment! 8 Cost of capital ? Think over: ? When the rate of return of a investment project is 10%, what ’ s the meaning? ?…?… 9 Cost of capital ? The concept of capital cost can be expressed by the following formula: 。; ;t capital k dividend and erest C capital C k C k Ck t nt t t n n cos _ __ int )1( )1()1(1 0 1 2 210??????????????? 10 Weighted average cost of capital ? A weighted cost of the individual costs of financing, which is equal to the cost of each source of financing multiplied by the percentage of the financing provided by that source.