公司理财精要版原书第12版教师手册RWJ_Fund_12e_IM_Chapter19_Appendi
公司理财精要版原书第12版教师手册RWJ_Fund_12e_IM_Chapter04
CHAPTER 4LONG-TERM FINANCIAL PLANNING AND GROWTH SLIDES4.1Chapter 44.2Key Concepts and Skills4.3Chapter Outline4.4Elements of Financial Planning4.5Financial Planning Process4.6Role of Financial Planning4.7Financial Planning Model Ingredients4.8Example: Historical Financial Statements4.9Example: Pro Forma Income Statement4.10Example: Pro Forma Balance Sheet4.11Percentages of Sales Approach4.12Example: Income Statement4.13Example: Balance Sheet4.14Example: External Financing Needed4.15Example: Operating at Less than Full Capacity4.16Work the Web Example4.17Growth and External Financing4.18The Internal Growth Rate4.19The Sustainable Growth Rate4.20Determinants of Growth4.21Important Questions4.22Quick Quiz4.23Ethics Issues4.24Comprehensive Problem4.25End of ChapterCHAPTER WEB SITESCHAPTER ORGANIZATION4.1 What Is Financial Planning?Growth as a Financial Management GoalDimensions of Financial PlanningWhat Can Planning Accomplish?4.2 Financial Planning Models: A First LookA Financial Planning Model: The IngredientsA Simple Financial Planning Model4.3 The Percentage of Sales ApproachThe Income StatementThe Balance SheetA Particular ScenarioAn Alternative Scenario4.4 External Financing and GrowthEFN and GrowthFinancial Policy and GrowthA Note about Sustainable Growth Rate Calculations4.5 Some Caveats Regarding Financial Planning Models4.6 Summary and ConclusionsANNOTATED CHAPTER OUTLINESlide 1: Chapter 4Slide 2: Key Concepts and SkillsSlide 3: Chapter Outline4.1.What is Financial Planning?Slide 4: Elements of Financial PlanningA.Growth as a Financial Management GoalGrowth is a by-product of increasing value, but it should not be agoal on its own.B.Dimensions of Financial PlanningSlide 5: Financial Planning ProcessPlanning horizon (usually <12 months for short-run and 2 – 5 yearsfor long-run)Aggregation is lumping accounts together.Lecture Tip: Students may grasp the notion of best- and worst-case scenarios only incompletely without realizing it. They oftenconsider only one dimension and have a tendency to focus only onlow sales or high costs. You may wish to emphasize that, in reality,it is often the confluence of several (sometimes related) factors incombination that constitute a worst- or best-case scenario. Onemight describe a worst-case scenario as one in which sales drop40% due to an economic downturn, which, in turn, causes a build-up in finished goods and is reflected in a slowing of payments fromcustomers and a reduction in the firm’s ability to b orrow on ashort-term basis. Financial management involves the ability todeal with these situations simultaneously—only with financialplanning of some type can you hope to estimate the multiple effectsof these events on cash flows and make contingency plans.C.What Can Planning Accomplish?Slide 6: Role of Financial Planning-Provide a better understanding of the interactions betweeninvestments and financing-Identify options-Help with contingency planning-Check for feasibility and internal consistency among goals4.2.Financial Planning Models: A First LookA. A Financial Planning Model: The IngredientsSlide 7: Financial Planning Model IngredientsSales Forecast – most other considerations depend upon the salesforecast, so it is said to “drive” the mod elPro Forma Statements – the output summarizing differentprojectionsAsset Requirements – investment needed to support sales growthFinancial Requirements – debt and dividend policiesThe “Plug” – designated source(s) of external financingEconomic Assumptions – state of the economy, anticipatedchanges in interest rates, inflation, etc.B. A Simple Financial Planning ModelLecture Tip: Some students may suggest that the effects ofaggregation produce “unrealistic” results. While this is correct, itmisses the point of the exercise. We are not producing a detailedfinancial plan at this point. We are highlighting financialrelationships, especially between investment and financingpolicies, which are important when planning for future growth.Real World Tip:One of the biggest developments in planning(financial and otherwise) has been the widespread adoption ofEnterprise Resource Planning (ERP) software by firms across theglobe. ERP software is designed to integrate virtually all of thetraditional business functions—production, accounting, finance,sales, and human resources—and provide real-time updating of allrecords. The vast majority of large firms, as well as many mediumand small firms, have implemented at least limited ERP solutions.4.3.The Percentage of Sales ApproachSlide 8: Example: Historical Financial StatementsA.The Income StatementSlide 9: Example: Pro Forma Income StatementSales generate retained earnings (unless all income is paid out individends). Retained earnings, plus external funds raised, supportan increase in assets. More assets lead to more sales, and the cyclestarts again.Given forecasted sales, a constant profit margin, and a specifieddividend policy, what retained earnings can be expected? The textprovides a numerical example; here is a general formula forobtaining the solution, assuming that all costs (includingdepreciation and interest) vary directly as a percent of sales:S = previous period’s salesg = projected growth rate of salesA = pre vious period’s ending total assetsPM = profit marginb = retention or plowback ratioAddition to retained earnings = PM × S(1 + g) × bLecture Tip: The new “flat” corporate tax embedded in the TaxCuts and Jobs Act of 2017 will simplify the forecasting of theestimated tax liability.B.The Balance SheetSlide 10: Example: Pro Forma Balance SheetWhat assets are needed to support sales growth? If we assume thatwe are operating at full capacity and that fixed assets can bepurchased in continuous amounts (lump-sum purchases are notrequired), a simplified approach can be used:A × g = Increase in assetsAlternatively, we might use a capital intensity ratio (Assets / Sales)to find the assets necessary to support $1 of sales. This can bedifferent for different types of assets, e.g., a ratio of .5 for currentassets and 1.5 for fixed assets. Moral: if the increase in total assetsexceeds the addition to retained earnings, the difference is externalfinancing needed, EFN.Lecture Tip: In the first three chapters of the text, we havedescribed “the financing decision” in one of two ways: either inbroad terms (e.g., referring simply to the means by which fundingis acquired to accomplish our investment objectives) or specifically(e.g., in terms of capital structure). At this point, the financingdecision is characterized in another way: as one aspect of the day-to-day operations of the business. You may wish to take thisopportunity to set the stage for the material on working capitalmanagement to be covered in subsequent chapters. Specifically, itcan be helpful to introduce the concept of “spontaneous”financing (financing that arises in the normal course of business,requires little face-to-face negotiation with the lender, and is lesslikely to result in bankruptcy proceedings in case of default).Students should be reminded that while long-term financingdecisions may have greater potential impacts on firm value, theyare made relatively infrequently. Short-term investment andfinancing decisions are made continuously and affect the dailycash flows of the business.C. A Particular ScenarioSlide 11: Percentage of Sales ApproachSlide 12: Example: Income StatementSlide 13: Example: Balance SheetSlide 14: Example: External Financing NeededThis section concludes the example begun previously.D.An Alternative ScenarioSlide 15: Example: Operating at Less Than Full CapacityWhat are the implications for the Percentage of Sales approach ifthe firm is not operating at full capacity? This section modifies andextends the example.Slide 16: Work the Web Example4.4.External Financing and GrowthSlide 17: Growth and External FinancingAll else being equal, more growth means more external financingwill be needed.Lecture Tip: You might point out that the relationship betweenfirm growth and external financing needs is of utmost importanceto firms in the early stages of their lives. Typically, these are firmsthat have developed a new product or technology, are experiencingrapid sales growth, have continuing capital needs, and must beextremely careful in forecasting cash flows. Since many of thesefirms are relatively small and/or new, their financing problems areoften exacerbated by a lack of access to the capital markets. Assuch, the “internal growth rate” and “sustainable growth rate”concepts are of particular importance to financial decision-makers.A.EFN and GrowthLecture Tip: For new firms, internal financing is often virtuallyzero, particularly if the product or service being developed has notyet been marketed to the public. External financing is, therefore,the only significant source of funds and may come from venturecap italists, banks, “angels,” or family and friends. There areplenty of online resources that can shed light on this issue. Moreinformation can be found in the chapter on “Raising Capital.”Assuming no spontaneous sources of funds, EFN equals theincrease in total assets, less the addition to retained earnings.Low growth firms will run a surplus that causes a decline in thedebt-to-equity ratio. As the growth rate increases, the surplusbecomes a deficit and the firm will need to turn to externalfinancing.B.Financial Policy and GrowthSlide 18: The Internal Growth RateThe internal growth rate (IGR) is the growth rate the firm canmaintain with internal financing only, while maintaining a constantdividend payout ratio.IGR = (ROA × b) ⁄ [1 − ROA × b]The sustainable growth rate (SGR) is the maximum growth rate afirm can achieve without external equity financing, whilemaintaining a constant debt-to-equity ratio and dividend payoutratio.Lecture Tip: With the newly lowered tax rate, margins will (allelse equal) increase, which would have the effect of lowering EFNand also increasing the internal (and sustainable) growth rate.Slide 19: The Sustainable Growth RateSGR = (ROE × b) ⁄ [1 − ROE × b]Lecture Tip: Some students will wonder why managers would wishto avoid issuing equity to meet anticipated financing needs. This isa good opportunity to bring in concepts from previous chapters(stockholder/bondholder conflicts of interest and agency costs), aswell as to introduce topics to be covered in future chapters(information asymmetry and signaling, flotation costs, high cost ofequity and corporate governance).Slide 20: Determinants of GrowthDeterminants of growth: From the DuPont identity, ROE can beviewed as the product of profit margin, total asset turnover, and theequity multiplier. Anything that increases ROE will increase thesustainable growth rate as well. Therefore, the sustainable growthrate depends on the following four factors:Operating efficiency—profit marginAsset use efficiency—total asset turnoverFinancial leverage—equity multiplierDividend policy—retention ratioLecture Tip: Wanting sales or revenues to grow by X% per year asa goal of the firm is properly understood as meaning: “All elseequal, we want sales to grow.” Here are some things to consider:-cutting margins might make sales grow, but is it good for thefirm?-using more assets may make sales grow, but is this trulyincreasing efficiency?-increasing financial leverage might pay for growth, but canthe firm survive?-cutting the dividend might pay for growth, but is it whatstockholders want?C. A Note on Sustainable Growth Rate CalculationsThe sustainable growth rate that we commonly see in other texts orapplications is ROE × b. Why is it different? The formula that isused throughout the text is based on an ROE that is computedusing ending balance sheet numbers for equity. The “simpler”formula is appropriate only when the ROE is computed usingbeginning equity balance sheet numbers.4.5.Some Caveats Regarding Financial Planning ModelsSlide 21: Important QuestionsThe problem is that the models are really accounting statementgenerators rather than determinants of value. As we will see, valueis determined by cash flows, timing, and risk. These financialplanning models do not address any of these issues.4.6.Summary and Conclusions Slide 22: Quick QuizSlide 23: Ethics IssuesSlide 24: Comprehensive Problem Slide 25: End of Chapter。
公司理财精要版原书第12版英文版最新精品课件Ross_12e_PPT_Ch03
3-2
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
3-7
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
KEY CONCEPTS AND SKILLS
• Standardize financial statements for comparison purposes
• Compute, and more importantly, interpret some common ratios
• Name the determinants of a firm’s profitability • Explain some of the problems and pitfalls in
• Cash and other current assets
▪ Decrease in liability or equity account
• Notes payable and long-term debt
3-6
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
公司理财(精要版·原书第12版)PPT中文Ch23 期权与公司理财
• Max(0, E-S)
▪ 如果 S<E, 则期权收益为E-S ▪ 如果 S>E,则期权收益为0
• 假设期权执行价格是$30。
看跌期权价值
看跌期权收益图
35 30 25 20 15 10
5 0
0
10 20 30 40 50 60
股票价格
期权相关术语
• 看涨期权 • 看跌期权 • 敲定价格或执行价格 • 到期日 • 期权溢价 • 期权卖方 • 美式期权 • 欧式期权
23-4
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
23-12
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
一个简单的模型
• 如果收益大于零，期权就是“价内期权”。
• 如果看涨期权是价内期权，那么期权的价值就是： ▪ C0 = S0 – PV(E)
• 如果看涨期权的价值不是这个，那么就存在套利机会。
23-11
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
公司理财(精要版·原书第12版)PPT中文Ch01公司理财概论
独资制
• 优点
▪ 易于组建
▪ 管制最少 ▪ 独资企业的所有者保留
企业全部的利润
▪ 所有企业的全部收入都 视同个人所得而纳税
• 缺点
▪ 限于所有者的寿命 ▪ 可以筹集到的权益金额
限于所有者个人财富的 金额
▪ 无限责任
▪ 所有权的转让困难
1-8
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
WEB示例
• 互联网提供了大量关于个别公司的信息。 • 雅虎财经就是一个很好的网站。 • 去网站，选择一个公司，看看你能找到什么信息!
1-14
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
学习目标
• 财务管理决策的基本类型和财务经理的作用 • 财务管理的目标 • 不同组织形态的企业的财务影响 • 经理和所有者之间的利益冲突
1-2
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
公司理财精要版原书第12版教师手册RWJ_Fund_12e_IM_Chapter25
CHAPTER 25MERGERS AND ACQUISITIONS SLIDES25.1 Chapter 2525.2 Key Concepts and Skills25.3 Chapter Outline25.4 The Legal Forms of Acquisitions25.5 Merger Terms25.6 Merger vs. Consolidation25.7 Acquisition of Stock25.8 Acquisition of Stock (ctd.)25.9 Acquisition of Assets25.10 Classification of Acquisitions25.11 Takeovers25.12 Going Private25.13 Alternatives to Merger25.14 Taxes and Acquisitions25.15 Accounting for Acquisitions25.16 Gains from Acquisitions25.17 Synergy25.18 Potential Sources of Synergy25.19 Potential Revenue Enhancement25.20 Potential Cost Reductions25.21 Potentially Lower Taxes25.22 Potential Reductions in Capital Needs 25.23 Avoiding Mistakes25.24 Inefficient Management25.25 Financial Side Effects of Acquisitions 25.26 EPS Growth25.27 Diversification25.28 Cost of an Acquisition25.29 Cash vs. Stock Acquisition25.30 Defensive Tactics25.31 More (Colorful) Terms – I25.32 More (Colorful) Terms – II25.33 More (Colorful) Terms – III25.34 More (Colorful) Terms – IV25.35 Evidence on Acquisitions25.36 Divestitures and Restructurings25.37 Quick Quiz25.38 Ethics Issues25.39 Comprehensive Problem25.40 End of ChapterCHAPTER WEB SITESCHAPTER ORGANIZATION25.1 The Legal Forms of AcquisitionsMerger or ConsolidationAcquisition of StockAcquisition of AssetsAcquisition ClassificationsA Note about TakeoversAlternatives to Merger25.2 Taxes and AcquisitionsDeterminants of Tax StatusTaxable versus Tax-Free Acquisitions 25.3 Accounting for AcquisitionsThe Purchase MethodMore about Goodwill25.4 Gains from AcquisitionsSynergyRevenue EnhancementCost ReductionsLower TaxesReductions in Capital NeedsAvoiding MistakesA Note about Inefficient Management25.5 Some Financial Side Effects of AcquisitionsEPS GrowthDiversification25.6 The Cost of an AcquisitionCase I: Cash AcquisitionCase II: Stock AcquisitionCash versus Common Stock25.7 Defensive TacticsThe Corporate CharterRepurchase and Standstill AgreementsPoison Pills and Share Rights PlansGoing Private and Leveraged BuyoutsOther Devices and Jargon of Corporate Takeovers25.8 Some Evidence on Acquisitions: Does M&A Pay?25.9 Divestitures and Restructurings25.10 Summary and ConclusionsANNOTATED CHAPTER OUTLINEVideo Note: See “Mergers and Acquisition”Slide 1: Chapter 25Slide 2: Key Concepts and SkillsSlide 3: Chapter Outline25.1 The Legal Forms of AcquisitionsSlide 4: The Legal Forms of AcquisitionsSlide 5: Merger TermsBidder firm – the company making an offer to buy the stock or assets ofanother firmTarget firm – the firm that is being soughtConsideration – cash or securities offered in an acquisition or mergerLecture Tip: Overall, the massive wave of mergers and restructurings ofthe 1980s resulted in increased competitiveness, lower costs, and greaterefficiency. A not-uncommon downside to the picture, however, is the jobloss and dislocation associated with the redeployment of corporate assets.Unfortunately, popular press writers rarely grasp the true causes of suchevents. One person who does is Peter Lynch, the successful formermanager of the Fidelity Magellan fund. Consider some of his statements.“It’s amazing that the basic cause of downsizing is sorarely acknowledged: these companies have more workersthan they really need – or can afford to pay.CEOs aren’t callous Scrooges shouting ‘Bah, humbug!’ asthey shove people out the door; they are responding to acompetitive situation that demands that they become moreproductive.If we must blame somebody for the layoffs, it ought to beyou and me. All of us are looking for the best deals inclothing, computers and telephone service – and rewardingthe high-quality, low-cost providers with our business. Ihaven’t met one person who would agree to pay AT&Ttwice the going rate for phone service if AT&T wouldpromise to stop laying people off. These companies areresponding to the constant pressure from consumers andshareholders.”A.Merger or ConsolidationSlide 7: Merger vs. ConsolidationMerger – the complete absorption of one company by another(assets and liabilities). The bidder remains and the target ceases toexist.Advantage – legally simple and relatively cheapDisadvantage – must be approved by a majority vote of theshareholders of both firms, usually requiring the cooperation ofboth managementsConsolidation – a new firm is created. Joined firms cease theirprevious existence.Lecture Tip: Appearing relatively infrequently in previousdecades, the use of the hostile takeover bid to acquire control of atarget firm exploded in the 1980s. The term “corporate raider”(used previously to describe someone who attempted to acquireboard seats via a proxy contest) entered the mainstream and thestereotypical raider was cemented in the public consciousness inthe guise of the Gordon Gekko character from the movie “WallStreet.”Hostile takeover bids are often made via tender offer to currentshareholders, which obviates the need to obtain approval from thetarget firm board. The rapid growth of hostile takeovers resulted inthe creation of an array of defensive mechanisms with which tofight them off.Often, but not always, hostile bids are launched against firms thathave been performing poorly; the combination of a depressedshare price and dissatisfaction with management increases thebidder’s chance of success. Of course, bids occur for otherreasons; the series of attempts by Kirk Kerkorian against Chryslercame following tremendous firm growth. Kerkorian, however,wanted management to release some of the $7 billion in cashreserves the firm had built up.B.Acquisition of StockSlide 7: Acquisition of StockSlide 8: Acquisition of Stock (ctd.)Taking control by buying the voting stock of another firm withcash, securities, or both.Tender offer – offer by one firm or individual to buy shares inanother firm from any shareholder. Such deals are often contingenton the bidder obtaining a minimum percentage of the shares;otherwise no go.Some factors involved in choosing between a tender offer and amerger:1. No shareholder vote is required for a tender offer. Shareholderschoose to sell or not.2. The tender offer bypasses the board and management of thetarget firm.3. In unfriendly bids, a tender offer may be a way around unwillingmanagers.4. In a tender offer, if the bidder ends up with less than 80% of thetarget firm’s stock, it must pay taxes on any dividends paid by thetarget.5. Complete absorption requires a merger. A tender offer is oftenthe first step toward a formal merger.C.Acquisition of AssetsSlide 9: Acquisition of AssetsIn an acquisition of assets, one firm buys most or all of another’sassets, but liabilities are not involved as with a merger.Transferring titles can make the process costly. The selling firmmay remain in business.D.Acquisition ClassificationsSlide 10: Classification of Acquisitions1. Horizontal acquisition – firms in the same industry2. Vertical acquisition – firms at different steps of in theproduction process3. Conglomerate acquisition – firms in unrelated industriesReal-World Tip: It is useful to give names to the various types ofmergers. For example, McDonnell-Douglas/Boeing,Conoco/Phillips, and SBC/AT&T are all examples of horizontalmergers. An example of a vertical merger would be Texaco (excessrefining capacity) and Getty Oil (significant oil reserves). U.S.Steel’s acquisition of Marathon Oil would be a conglomerateacquisition.E. A Note about TakeoversLecture Tip: The popularity of proxy contests as a means ofgaining control has waxed and waned over the last severaldecades. In the 1950s, this approach was a relatively popularmeans of removing target firm management; as noted previously,those who initiated proxy contests were even referred to in thepopular pre ss as “corporate raiders!” Empirical evidencesuggests, however, that proxy contests are time-consuming,expensive for the dissident shareholder, and unlikely to result incomplete victory.Tender offers came to the fore in the 1960s and 1970s. Somebelieve that the use of the proxy battle waned because of itsrelatively high cost and low probability of success. However, theubiquity of takeover defenses and regulatory constraints hascontributed to the return of the importance of the proxy battle as ameans of gaining control.Real-World Tip: An interesting example of a long, drawn-outproxy battle appeared in The Wall Street Journal on October 8,1996. Physician Steven Scott founded Coastal Physicians Group,Inc., but was subsequently ousted by its board of directors. Dr.Scott then filed suit and launched a proxy fight. In return, thefirm’s management counter-sued and blamed him for the firm’spoor performance. Following several months of wrangling, twocandidates backed by Dr. Scott won board seats. The struggle forcontrol of Coastal is not unlike many proxy fights, in that they areoften associated with claims and counter-claims, lawsuits, and agreat deal of acrimony and expense.Slide 11: TakeoversSlide 12: Going PrivateFour means to gain control of a firm:1. Acquisitions – merger or consolidation, tender offer, acquisitionof assets2. Proxy contests – gain control by electing directors using proxies3. Going private – all shares bought by a small group of investors4. Leveraged buyouts (LBOs) – going private with borrowedmoneyF.Alternatives to MergerSlide 13: Alternatives to MergerFirms could simply agree to work together via a joint venture orstrategic alliance.25.2 Taxes and AcquisitionsG.Determinants of Tax StatusSlide 14: Taxes and AcquisitionsTax-free – acquisitions must be for a business purpose, and theremust be a continuity of equity interestTaxable – if cash or a security other than stock is used, theacquisition is taxableH.Taxable versus Tax-Free AcquisitionCapital gains effect –if taxable, the target’s shareholders may endup paying capital gains taxes, driving up the cost of the acquisitionWrite-up effect –if taxable, the target’s assets may be revalued,i.e., written up and depreciation increased. However, the TaxReform Act of 1986 made the write-up a taxable gain, making theprocess less attractive.25.3 Accounting for AcquisitionsSlide 15: Accounting for AcquisitionsIn 2001, FASB eliminated the pooling of interest option.There are no cash flow consequences stemming from theaccounting method used.A.The Purchase MethodThe target firm’s assets are reported at fair market value on thebidder’s books. The difference between the assets’ market valueand the acquisition price is goodwill.Below is an additional example depicting the balance sheet effectsof the purchase method.Example: Firm X borrows $10 million to acquire Firm Y, creatingFirm XY.Balance Sheets (in millions) prior to the acquisition:Firm Y’s fixed assets have a market value of $8 million, makingtotal assets worth $9 million.Balance Sheet after the acquisition:Firm XYWorking Capital $ 3 Debt $10Fixed Assets 26 Equity 20Goodwill 1Total Assets $30 Total L & E $30B.More about GoodwillBecause of the requirement that all mergers be accounted for usingthe purchase method, the FASB changed the rules on Goodwill.Companies are no longer required to amortize goodwill. However,it must be reduced in the case where the value has decreased.25.4 Gains from AcquisitionsSlide 16: Gains from AcquisitionsC.SynergySlide 17: SynergyThe difference between the value of the combined firms and thesum of the individual firms is the incremental gain, ∆V = V AB−(V A + V B).Synergy – the value of the whole exceeds the sum of the parts(∆V > 0)Slide 18: Potential Sources of SynergyThe value of Firm B to Firm A = V B* = ∆V + V B. V B* will begreater than V B if the acquisition produces positive incrementalcash flows, ∆CF.∆CF = ∆EBIT + ∆Depreciation + ∆Taxes − ∆CapitalRequirements∆CF = ∆Revenue − ∆Costs − ∆Taxes − ∆Capital RequirementsD.Revenue EnhancementSlide 19: Potential Revenue Enhancement1. Marketing gains – changes in advertising efforts, changes in thedistribution network, changes in the product mix2. Strategic benefits (beachheads) – acquisitions that allow a firmto enter a new industry that may become a platform for furtherexpansion3. Market power – reduction in competition or increase in marketshareLecture Tip: The text notes several reasons for M&A activity. Thefollowing was sent via email to members of a mergers andacquisitions listserv.“Do you know a business experiencing a decline insales, loss of direction, no longer competitive,ineffective management, … Or a business that’s beingneg lected by its corporate parent … Or a [sic] ownerlooking to retire that built a once successful businessnow needing reinventing … or a company that needsstrong marketing, finance, and manufacturingdisciplines … If you know such a business … it will beworth your while to reply.”E.Cost ReductionsSlide 20: Potential Cost Reductions1. Economies of scale – per unit costs decline with increasingoutput2. Economies of vertical integration – coordinating closely relatedactivities or technology transfers3. Complementary resources (economies of scope) – example:banks that allow insurance or stock brokerage services to be soldon premisesF.Lower TaxesSlide 21: Potentially Lower Taxes1. Net operating losses (NOL) – a firm with losses and not payingtaxes may be attractive to a firm with significant tax liabilities-In fact, a firm with losses can carryforward these to offsetfuture income (the carryback provision was eliminated in theTax Cuts and Jobs Act of 2017)-The IRS may disallow an acquisition if the principal purposeof the acquisition is to avoid federal tax2. Unused debt capacity – adding debt can provide important taxsavings (although, the new tax law has put some limits on thedeductibility of interest)3. Surplus funds – firms with significant free cash flow can:-Pay dividends-Repurchase shares-Acquire shares or assets of another firm4. Asset Write-Ups – if assets are written UP to market value, thenthe tax deduction for depreciation could increaseLecture Tip: The IRS requires that the merger must havejustifiable business purposes for the NOL carryforward to beallowed. And, if the acquisition involves a cash payment to thetarget firm’s shareholders, the acquisition is considered a taxablereorganization that results in a loss of NOLs. NOL carryforwardsare allowed in a tax-free reorganization that involves an exchangeof the acquiring firm’s common stock for the acquired firm’scommon stock. Additionally, if the target firm operates as aseparate subsidiary within the acquir ing firm’s organization, theIRS will allow the carry-over to shelter the subsidiary’s futureearnings, but not the acquiring firm’s future earnings.G.Reductions in Capital NeedsSlide 22: Potential Reductions in Capital Needs1. A firm needing capacity acquires a firm with excess capacityrather than building new facilities2. Possible advantages to raising capital given economies of scalein issuing securities3. May reduce the investment in working capitalH.Avoiding MistakesSlide 23: Avoiding Mistakes1. Do not ignore market values. Use the current market value as astarting point and ask “What will change if the merger oracquisition takes place?”2. Estimate only incremental cash flows. These are the basis ofsynergy.3. Use the correct discount rate. Make sure to use a rate appropriateto the risk of the cash flows.4. Be aware of transaction costs. These can be substantial andshould include fees paid to investment bankers and lawyers, aswell as disclosure costs.I. A Note about Inefficient ManagementSlide 24: Inefficient ManagementIf management isn’t doing its job well, or others may be able to dothe job better, acquisitions are one way to replace management.The threat of takeover may be enough to make managers act in thebest interest of shareholders.Lecture Tip: One of the fathers of modern takeover theory isHenry Manne, who published “Mergers and the Market forCorporate Control” in 1965. In this seminal work, Manneproposes the (now commonly accepted) notion that poorly runfirms are natural takeover targets because their market values willbe depressed, permitting acquirers to earn larger returns byrunning the firms successfully. This proposition has been verifiedempirically in dozens of academic studies over the last fourdecades.25.5 Some Financial Side Effects of AcquisitionsSlide 25: Financial Side Effects of AcquisitionJ.EPS GrowthSlide 26: EPS GrowthAn acquisition may give the appearance of growth in EPS withoutactually changing cash flows. This happens when the bidd er’sstock price is higher than the target’s, so that fewer shares areoutstanding after the acquisition than before.Example: Pizza Shack wants to merge with Checkers Pizza. Themerger won’t create any additional value, so, assuming the marketisn’t fooled, the new firm, Stop ‘n Go Pizza, will be valued at thesum of the separate market values of the firms.Stop ‘n Go is valued at $1,875,000 and has 125,000 sharesoutstanding with a price of $15 per share. Pizza Shackstockholders receive 100,000 shares, and Checkers Pizzastockholders receive 25,000 shares.Before and after merger financial positionsLecture Tip: Who have been some of the top dealmakers? The February 2007 edition of Mergers and Acquisitions Journal indicates that six firms advised in 200 or more transactions during 2006. The number of deals and the dollar volume involved was as follows:2006 Leaders (200+ Deals) Company No. of M&ADeals$ Volume of M&ADeals (millions)1 Goldman Sachs 269 $735.42 JP Morgan 252 $554.53 Morgan Stanley 230 $616.44 Credit Suisse 226 $435.35 UBS 221 $375.66 Citigroup 217 $568.4K.DiversificationSlide 27: DiversificationA firm’s attempt at diversification does not create value becausestockholders could buy the stock of both firms, probably morecheaply. Firms cannot reduce their systematic risk by merging.Lecture Tip: In earlier chapters, we pointed out that conflicts ofinterest may exist between stockholders and managers in publiclytraded firms. As noted above, diversification-based mergers don’tcreate value for shareholders (this was illustrated using optionpricing theory in an earlier chapter); however, these mergers mayincrease sales and reduce the total variability of firm cash flows. Ifmanagerial compensation and/or prestige is related to firm size, orif less variable cash flows reduce the likelihood of managerialreplacement, then some mergers may be initiated for the wrongreasons—they may be in the best interest of managers but notstockholders.25.6 The Cost of an AcquisitionSlide 28: Cost of an AcquisitionThe NPV of a merger = V B*− Cost to Firm A of the acquisitionMerger premium – amount paid above the stand-alone valueReconsider Pizza Shack’s merger with Checkers Pizza. SupposePizza Shack acquires Checkers in a buyout. Pizza Shack hasestimated the incremental value of the acquisition, ∆V, to be$75,000. The value of Checkers to Pizza Shack is V C* = ∆V + V C= $75,000 + $375,000 = $450,000. Checkers shareholders arewilling to sell for $400,000. Thus, the merger premium is $25,000.A.Case I: Cash AcquisitionSuppose Pizza Shack pays Checkers’ stockholders $400,000 incash. Then, NPV = $450,000 − $400,000 = $50,000.The value of the combined firm = $1,500,000 + $50,000 =$1,550,000With 100,000 shares outstanding, the price per share becomes$15.50B.Case II: Stock AcquisitionSuppose, instead of cash, Pizza Shack gives Checkers stockholdersPizza Shack stock valued at $15 per share. Checkers stockholderswill get 400,000 ⁄ 15 = 26,667 shares (rounded). The new firm willhave 126,667 shares outstanding and a value of $1,500,000 +$375,000 + $75,000 = $1,950,000 for a per share price of $15.39.The total consideration is 26,667(15.39) = $410,405.13. The extra$10,405.13 comes from allowing Checkers stockholdersproportional participation in the $50,000 NPV.C.Cash versus Common StockSlide 29: Cash vs. Stock Acquisition1. Sharing gains –When cash is used, the target’s stockholderscan’t gain beyond the purchase price. Of course, they can’t fallbelow either.2. Taxes – Cash transactions are generally taxable; exchangingstock is generally tax-free.3. Control – Using stock may have implications for control of themerged firm.Lecture Tip: Emphasize that the logic used in determining theNPV of an acquisition is the same as that used to find the NPV ofany other project. The acquisition is desirable if the present valueof the incremental cash flows exceeds the cost of acquiring them.However, some financial theorists argue that many acquisitionscontain a “winner’s curse.” The argument is that the winner of anacquisition contest is the firm that most overestimates the truevalue of the target. As such, this bid is most likely to be excessive.For a more detailed discussion of the “winner’s curse,” see NikVaraiya and Kenneth Ferris, “Overpaying in CorporateTakeovers: The Winner’s Curse,” Financial Analysts Journal,1987, vol. 43. no. 3. Richard Roll, in “The Hubris Hypothesis ofCorporate Takeovers,” Journal of Business, 1986, vol. 59, no. 2,attributed the rationale for this behavior to hubris, i.e., theexcessive arrogance or greed of management.25.7 Defensive TacticsSlide 30: Defensive TacticsD.The Corporate Charter-Usually, 67% of stockholders must approve a merger. Asupermajority amendment requires 80% or more to approve amerger.-Staggered terms for board membersE.Repurchase and Standstill AgreementsA standstill agreement involves getting the bidder to agree to backoff, usually by buying the bidder’s stock back at a substantialpremium (targeted repurchase); also called greenmail.Example: Ashland Oil bought off the Belzbergs of Canada in atargeted repurchase. Ashland also had an established employeestock ownership with 27% of outstanding shares owned byemployees and had earlier adopted a supermajority provision.F.Poison Pills and Share Rights PlansIn a share rights plan, the firm distributes rights to purchase stockat a fixed price to existing shareholders. These can’t be detached orexercised until “triggered,” but they can be bought back by thefirm. They are usually triggered when a tender offer is made.Flip-over provision –the “poison” in the pill. Effectively, thetarget firm’s shareholders get to buy stock in the target firm at halfprice.G.Going Private and Leveraged BuyoutsGoing private can prevent takeovers that conflict withmanagement’s point of view.H.Other Devices and Jargon of Corporate TakeoversSlide 31: More (Colorful) Terms – ISlide 32: More (Colorful) Terms – IISlide 33: More (Colorful) Terms – IIISlide 34: More (Colorful) Terms – IV1. Golden parachutes – compensation to top management in theevent of a takeover2. Poison puts – forces the firm to buy stock back at a set price3. Crown jewels –a “scorched earth” strategy of threatening to sellmajor assets4. White knights – target of hostile bid hopes to find a friendly firm(white knight) to buy a large block of stock (often on favorableterms) to halt takeover5. Lockups – option granted to friendly firm giving it the right tobuy stock or major assets at a fixed price in the event of a hostiletakeover6. Shark repellent – any tactic designed to discourage unwantedtakeovers7. Bear hug –“an offer you can’t refuse”8. Fair price provision – all selling shareholders must receive thesame price from the bidder—eliminates the ability to make a two-tier offer to encourage shareholders to tender early9. Dual class capitalization – more than one class of common stockwith most of the voting power privately held10. Countertender offer –“Pac-Man” defense – target offers to buythe bidderEthics Note: In The Law and Finance of Corporate InsiderTrading: Theory and Evidence (Kluwer Publishing, 1993) Arshadiand Eyssell argue that an active market for corporate control willbe characterized by increases in the nature and complexity ofdefensive tactics and by an increasing volume of pre-announcement insider trading. In the case of the former, managersfacing an environment that is (from their perspective) increasinglyhostile and will seek to defend themselves and their positions.Defensive tactics will be implemented, tested by takeover bids andin the courts, and modified.Trading on nonpublic information has been shown in numerousacademic studies to be extremely profitable (albeit illegal), thusthe conclusion that financial markets are not strong-form efficient.In the case of takeover bids, insider trading is argued to beparticularly endemic because of the large potential profits involvedand because of the relatively large number of people “in on thesecret.” Managers, employees, investment bankers, attorneys, andfinancial printers have all been accused in various takeover-related insider trading cases.Lecture Tip:Less common, but not rare, are “reverse mergers,”in which a firm goes public by merging with a public (often shell)company. Ted Turner gained control of Rice Broadcasting (WJRJ-TV) in 1970 by doing a reverse merger. Rice Broadcasting was“virtually insolvent,” but by merging into a public company,Turner was obtaining financing for subsequent growth.25.8 Some Evidence on Acquisitions: Does M&A Pay?Slide 35: Evidence on AcquisitionsAvailable evidence suggests that target stockholders makesignificant gains—more in tender offers than in mergers. On theother hand, bidder stockholders earn comparatively little, breakingeven on mergers and making a few percent on tender offers.Lecture Tip: It is probably not overstating the matter to say thatthe accepted wisdom in modern finance is that, in the aggregate,more merger and acquisition activity is preferred to less. Dozensof event studies report that, on average, the wealth of target firmstockholders is greatly enhanced, while the wealth of acquiringfirm stockholders is unaffected, or at worst, slightly diminished.For many, the notion that an active market for corporate control isa good thing has become so ingrained that we are somewhatsurprised when others don’t view things the same way. However,in an interesting essay in the August 1998 issue of Harpersmagazine, Lewis H. Lapham likens the sequential announcementsof seemingly ever-larger corporate combinations to the elephantact at the circus:。
公司理财精要版原书第12版英文版最新精品课件Ross_12e_PPT_Ch22
CHAPTER OUTLINE
• Introduction to Behavioral Finance • Biases • Framing Effects • Heuristics • Behavioral Finance and Market Efficiency • Market Efficiency and the Performance of
psychology that men have greater degrees of overconfidence than women.
22-7
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
OVERCONFIDENCE AND STOCK MARKET TRADING
• It has been shown that overconfidence by investors leads to overestimation of their own ability to pick the best stocks, leading to excessive trading.
OVERCONFIDENCE
• Example: 80 percent of drivers consider themselves to be above average.
• Business decisions require judgment of an unknown future.
公司理财精要版原书第12版教师手册RWJ_Fund_12e_IM_Chapter18
Chapter 18SHORT-TERM FINANCE AND PLANNING SLIDES18.1Chapter 1818.2Key Concepts and Skills18.3Chapter Outline18.4Sources and Uses of Cash18.5The Operating Cycle18.6Cash Cycle18.7Figure 18.1: Cash Flow Time Line18.8Example Information18.9Example: Operating Cycle18.10Example: Cash Cycle18.11Short-Term Financial Policy18.12Carrying vs. Shortage Costs18.13Temporary vs. Permanent Assets18.14Figure 18.4: Total Asset Requirements over Time18.15Choosing the Best Policy18.16Figure 18.6: A Compromise Financing Policy18.17Cash Budget18.18Example: Cash Budget Information18.19Example: Cash Budget – Cash Collection18.20Example: Cash Budget – Cash Disbursements18.21Example: Cash Budget – Net Cash Flow and Cash Balance 18.22Short-Term Borrowing18.23Example: Compensating Balance18.24Example: Factoring18.25Short-Term Financial Plan18.26Quick Quiz18.27Ethics Issues18.28Comprehensive Problem18.29End of ChapterCHAPTER WEB SITESCHAPTER ORGANIZATION18.1Tracing Cash and Net Working Capital18.2The Operating Cycle and the Cash CycleDefining the Operating and Cash CyclesThe Operating Cycle and the Firm’s Organizational ChartCalculating the Operating and Cash CyclesInterpreting the Cash Cycle18.3Some Aspects of Short-Term Financial PolicyThe Size of the Firm’s Investment in Current AssetsAlternative Financing Policies for Current AssetsWhich Financing Policy Is Best?Current Assets and Liabilities in Practice18.4The Cash BudgetSales and Cash CollectionsCash OutflowsThe Cash Balance18.5Short-Term BorrowingUnsecured LoansSecured LoansOther Sources18.6 A Short-Term Financial Plan18.7Summary and ConclusionsANNOTATED CHAPTER OUTLINELecture Tip: For some reason, many students (and some faculty)view short-term finance generally, and working capitalmanagement specifically, as less important than capital budgetingor the risk-return relationship. You may find it useful to emphasizethe importance of short-term finance in introducing the currentchapter.First, discussions with CFOs quickly lead to the conclusion that, asimportant as capital budgeting and capital structure decisions are,they are made less frequently, while the day-to-day complexitiesinvolving the management of net working capital (especially cashand inventory) consume tremendous amounts of management time.Second, it is clear that while poor long-term investment andfinancing decisions will adversely impact firm value, poor short-term financial decisions will impair the firm’s ability to continueoperating. Finally, good working capital decisions can also have amajor impact on firm value.Slide 1: Chapter 18Slide 2: Key Concepts and SkillsSlide 3: Chapter Outline18.1Tracing Cash and Net Working CapitalSlide 4: Sources and Uses of CashDefining Cash in Terms of Other ElementsNet working capital + Fixed assets = Long-term debt + EquityNet working capital = Cash + Other current assets − CurrentliabilitiesSubstituting NWC into the first equation and rearranging;Cash = Long-term debt + Equity + Current Liabilities − Othercurrent assets − Fixed assetsSources of Cash (Activities that increase cash)Increase in long-term debt account (borrowed money)Increase in equity accounts (sold stock)Increase in current liability accounts (borrowed money)Decrease in current asset accounts, other than cash (soldcurrent assets)Decrease in fixed assets (sold fixed assets)Uses of Cash (Activities that decrease cash)Decrease in long-term debt account (repaid loans)Decrease in equity accounts (repurchased stock or paiddividends)Decrease in current liability accounts (repaid suppliers or short-term creditors)Increase in current asset accounts, other than cash (purchasedcurrent assets)Increase in fixed assets (purchased fixed assets)Lecture Tip: Concept question 18.1b asks students to considerwhether net working capital always increases when cashincreas es. The best way to illustrate why the answer to this is “no”is to work an example: Suppose a firm currently has $50,000 incurrent assets and $20,000 in current liabilities; so NWC =$50,000 − 20,000 = 30,000. Management decides to borrow$10,000 using long-term debt. What happens to cash and NWC?Cash increases by $10,000 and NWC = (50,000 + 10,000) −20,000 = 40,000. So, both cash and NWC increase by 10,000.Suppose, on the other hand, management borrowed the $10,000from a bank as a short-term loan. Cash still increases by $10,000,but net working capital doesn’t change ( NWC = (50,000 +10,000) − (20,000 + 10,000) = 30,000). The effect of an increasein cash on NWC depends on where the increase comes from; if theincrease comes from a change in long-term liabilities, equity orfixed assets, then there will be an increase in NWC. On the otherhand, if the increase comes from a change in current liabilities orcurrent assets, then there will be no impact on NWC.18.2 The Operating Cycle and the Cash CycleA.Defining the Operating and Cash CyclesSlide 5: The Operating CycleThe operating cycle is the average time required to acquireinventory, sell it, and collect for it.Operating cycle = Inventory period + Accounts receivableperiodThe inventory period is the time to acquire and sell inventory.Inventory turnover = Cost of goods sold ⁄ A verageinventoryInventory period = 365 ⁄ I nventory turnoverThe accounts receivable period (average collection period) isthe time to collect on the sale.Receivables turnover = Credit sales ⁄ Average receivablesAccounts receivable period = 365 ⁄ Receivables turnover Slide 6: Cash CycleThe cash cycle is the average time between cash disbursementfor purchases and cash received from collections.Cash cycle = Operating cycle − Accounts payable period Slide 7: Figure 18.1: Cash Flow Time LineThe accounts payable period is the time between receipt ofinventory and payment for it.Payables turnover = Cost of goods sold ⁄ Average payablesPayables period = 365 ⁄ Payables turnoverLecture Tip: Students should recognize that a company wouldprefer to take as long as possible before paying bills. You mightmention that accounts payable is often viewed as “free credit;”however, the cost of granting credit is built into the cost of theproduct. Note that the operating cycle begins when inventory ispurchased and the cash cycle begins with the payment of accountspayable.B.The Operating Cycle and the Firm’s Organizational ChartShort-term financial management in a large firm involvescoordination between the credit manager, the marketing manager,and the controller. Potential for conflict may exist if particularmanagers concentrate on individual objectives as opposed tooverall firm objectives.C.Calculating the Operating and Cash CyclesLecture Tip: In this chapter, we use average values of inventory,accounts receivable, and accounts payable to compute values ofinventory turnover, accounts receivable turnover and accountspayable turnover, respectively. Remind students that the balancesheet represents a financial “snapshot” of the firm and, as such,balance sheet values literally change on a daily basis. One way toreduce the distortions caused by dividing a “flow” value (incomestatement numbers that represent what has happened over a periodof time) by a “snapshot” value is to use the average “snapshot”value computed over the same period.Slide 8: Example InformationSlide 9: Example: Operating CycleSlide 10: Example: Cash CycleConsider this example (similar to the one in the book):Item Beginning Ending AverageInventory 200,000 300,000 250,000Accounts Receivable 160,000 200,000 180,000Accounts Payable 75,000 100,000 87,500Net sales = 1,150,000; COGS = $820,000Finding inventory period:Inventory tu rnover = 820,000 ⁄ 250,000 = 3.28 timesInventory period = 365 ⁄ 3.28 = 111 daysFinding accounts receivables period:Receivables turnover = 1,150,000 ⁄ 180,000 = 6.39 timesAcc ounts receivables period = 365 ⁄ 6.39 = 57 daysOperating cycle = 111 + 57 = 168 daysFinding accounts payables period:Payables turnover = 820,000 ⁄ 87,500 = 9.37 timesAccounts payables period = 365 ⁄ 9.37 = 39 daysCash cycle = 168 − 39 = 129 daysD.Interpreting the Cash CycleA positive cash cycle means that inventory is paid for before it issold and the cash from the sale is collected. In this situation, a firmmust finance the current assets until the cash is collected. The nextsection addresses the issue of how to finance the cash cycle.Lecture Tip: It may be beneficial to have students consider theinteractions imbedded in the cash cycle. For example, studentsmay feel that the main demand on funds, for example, comes fromthe inventory period. However, the students should consider theinteractions involved when trying to speed up the inventoryturnover. Increasing inventory turnover may involve relaxingcredit terms, which will result in a lower receivables turnover. Theultimate effect will depend on the trade-off between the two and the cash flows that are generated.Real-World Tip: This discussion suggests that, depending oninventory needs and financing costs, some firms will find it usefulto hire others to “store inventory” for them. In fact,Boeing/McDonnell-Douglas Aircraft in St. Louis does exactlythat—small firms are paid to guarantee the delivery of rawmaterials (copper, sheet steel, etc.) to the firm at a moment’snotice. And while these firms also do some preliminary cutting andmachining, their primary role is to hold inventory thatBoeing/McDonnell-Douglas would otherwise have to hold. As aresult, the firm’s financing needs are lessened.The relationship between inventory turnover and financing needsis also apparent in industries with extremely long or short cashcycles. For example, cash cycles are relatively long in the jewelryretailing industry, and particularly short in the grocery industry.18.3 Some Aspects of Short-Term Financial PolicyA.The Size of the Firm’s Investment in Current AssetsSlide 11: Short-Term Financial PolicyIf cash was collected from sales when the bills had to be paid, thencash balances and net working capital could be zero. The greaterthe mismatch between collections and payment, and theuncertainty surrounding collections, the greater the need tomaintain some cash balances and to have positive net workingcapital.Flexible (conservative) policy – high levels of current assetsrelative to sales, relatively more long-term financing:-Keep large cash and securities balances (lower return, but cashavailable for emergencies and unexpected opportunities)-Keep large amounts of inventory (higher carrying costs, butlower shortage costs including lost customers due to stock-outs)-Liberal credit terms, resulting in large receivables (greaterprobability of default from customers and usually a longerreceivables period, but leading to an increase in sales)Restrictive (aggressive) policy – low levels of current assetsrelative to sales, relatively more short-term financing:-Keep low cash and securities balances (may be short of cashin emergencies or unable to take advantage of unexpectedopportunities, but higher return on long-term assets)-Keep low levels of inventory (high shortage costs, particularlybad in industries where there are plenty of close substitutes thatcustomers can turn to, lower carrying costs)-Strict credit policies, or no credit sales (may substantially cutsales level, reduce cash cycle, and need for financing)Slide 12: Carrying vs. Shortage CostsCarrying costs – costs that increase with investment in currentassets-Opportunity cost of investing in (and financing) low-yieldassets-Cost associated with storing inventoryShortage costs – costs that decrease with investment in currentassets-Trading and order costs – commissions, set-up, and paperwork-Stock-out costs – lost sales, business disruptions, and alienatedcustomersLecture Tip: The just-in-time inventory system is designed toreduce the inventory period. In essence, companies pay theirsuppliers to carry the inventory for them. Reducing the inventoryperiod reduces the operating cycle and thus the cash cycle. Thisreduces the need for financing. Ask the students to consider whattype of cost is being minimized and what costs are likely toincrease. Ask them if JIT inventory policies are appropriate for allindustries. It makes sense for industries that have substantialcarrying costs with relatively low shortage costs, but not forindustries where shortage costs outweigh carrying costs.B.Alternative Financing Policies for Current AssetsSlide 13: Temporary vs. Permanent AssetSlide 14: Figure 18.4: Total Asset Requirement over TimeIdeally, we could always finance short-term assets with short-termdebt and long-term assets with long-term debt and equity.However, this is not always feasible.Lecture Tip: Some students tend to think permanent assets consistonly of fixed assets. Emphasize that a certain level of currentassets is also “permanent.” Consider the following example:January February March AprilCurrent Assets 20,000 30,000 20,000 20,000Fixed Assets 50,000 50,000 50,000 50,000Permanent Assets 70,000 70,000 70,000 70,000Temporary Assets 0 10,000 0 0Ask students to consider what the levels of permanent assets andtemporary assets are for each month.A flexible policy would finance $80,000 with long-term debt andhave excess cash of $10,000 to invest in marketable securities inJanuary, March, and April. Overall, the interest expense on theextra $10,000 borrowed long-term will outweigh the interestreceived from the marketable securities.A restrictive policy would finance $70,000 with long-term debt. InFebruary, the firm would borrow $10,000 on a short-term basis tocover the cost of temporary assets in that month. The short-termloan would be repaid in March.C.Which Financing Policy is Best?Slide 15: Choosing the Best PolicySlide 16: Figure 18.6: A Compromise Financing PolicyThings to consider:1. Cash reserves – more important when a firm has unexpectedopportunities on a regular basis or where financial distress is astrong possibility2. Maturity hedging – match liabilities to assets as closely aspossible, avoid financing long-term assets with short-termliabilities (risky due to possibility of increase in rates and the riskof not being able to refinance)3. Relative interest rates – short-term rates are usually, but notalways, lower; they are almost always more volatileLecture Tip: Personal financial situations provide ample examplesof maturity matching. We tend to use 30-year loans when we buyhouses and 4–5 year loans for cars. Why wouldn’t we finance theseassets with short-term loans? What if you borrowed $200,000 tobuy a house using a 1-year note? In one year, you either have topay off the loan with cash or refinance. If you refinance, you havethe transaction costs associated with obtaining a new loan and thepossibility that rates increased substantially during the year.Adjustable loans adjust annually, the initial rate is generally lowerthan a fixed rate loan, and there are limits to how much the loanrate can increase in any given year and over the life of the loan.Also, there are no transaction costs associated with the rateadjustment on an ARM.D.Current Assets and Liabilities in PracticeThe level of current assets and current liabilities depends largelyon the industry involved. The same is true for the cash cycle.18.4The Cash BudgetA.Sales and Cash CollectionsSlide 17: Cash BudgetCash budget – a schedule of projected cash receipts anddisbursementsSlide 18: Example: Cash Budget InformationSlide 19: Example: Cash Budget – Cash CollectionsA cash budget requires sales forecasts for a series of periods. Theother cash flows in the cash budget are generally based on the salesestimates. We also need to know the average collection period onreceivables to determine when the cash inflow from sales actuallyoccurs.B.Cash OutflowsSlide 20: Example: Cash Budget – Cash DisbursementsCommon cash outflows:-Accounts payable – what is the accounts payables period?-Wages, taxes, and other expenses – usually expressed as a percentof sales (implies that they are variable costs)-Fixed expenses, when applicable-Capital expenditures – determined by the capital budget-Long-term financing expenses – interest expense, dividends,sinking fund payments, etc.-Short-term borrowing – determined based on the otherinformationC.The Cash BalanceSlide 21: Example: Cash Budget – Net Cash Flow and Cash BalanceNet cash inflow is the difference between cash collections and cashdisbursements18.5 Short-Term BorrowingSlide 22: Short-Term BorrowingA.Unsecured LoansLine of credit – formal or informal prearranged short-term loansCommitment fee – charge to secure a committed line of creditCompensating balance – deposit in a low (or no) interest accountas part of a loan agreementCost of a compensating balance – if the compensating balancerequirement is on the used portion, less money than what isborrowed is actually available for use. If it is on the unusedportion, the requirement becomes a commitment fee.Slide 23: Example: Compensating BalanceExample: Consider a $50,000 line of credit with a 5%compensating balance requirement. The quoted rate on the line isprime + 5%, and the prime rate is currently 8%. Suppose the firmwants to borrow $28,500. How much do they have to borrow?What is the effective annual rate?Loan Amount: 28,500 = (1 − .05)LL = 28,500 ⁄ .95 = 30,000Effective rate: Interest paid = 30,000(.13) = 3,900. Effective rate =3,900 ⁄ 28,500 = .1368 = 13.68%Lecture Tip: Credit cards are an excellent way to illustrate theconcept of a “personal” line of credit. The consumer c an use theline of credit on the credit card to purchase goods or services. Theline of credit remains active until we abuse the privilege (i.e., latepayments). There is often a cost for this line of credit in the form ofannual fees. This is in addition to the often high rates of interest.College students are targeted by credit card companies and canend up holding several cards at one time. The cost of the annualfees can add up—especially if they don’t need the additional creditto begin with. Students also have the habit of charging to theirlimits and then just making the minimum payment.Lecture Tip: Trade credit represents another source of unsecuredfinancing. However, the cost of this form of borrowing is largelyimplicit, since it is represented by the opportunity cost of nottaking the discount offered, if any. To compute the effective annualcost of trade credit, we first use the credit terms to determine aperiodic opportunity cost. For example, if the terms are 2/10 net30, rational managers will either pay $.98 per dollar of goodsordered on the 10th day, or the full invoice cost on the 30th day. Inthe latter case, the firm is actually paying $.02 to borrow $0.98 for20 da ys. In one year, there are 365 ⁄ 20 = 18.25 such periods.Therefore, the annualized cost is (1 + .02 ⁄ .98)18.25− 1 = 44.58%.B.Secured LoansAccounts Receivable Financing-Assigning receivables – receivables are security for a loan, butthe borrower retains the risk of uncollected receivablesSlide 24: Example: Factoring-Factoring – receivables are sold at a discountInventory Loans-Blanket inventory lien – all inventory acts as security for theloan-Trust receipt – borrower holds specific inventory in trust forthe lender (e.g., automobile dealer financing)-Field warehouse financing – public warehouse acts as acontrol agent to supervise inventory for the lenderLecture Tip: Inventory needs to be non-perishable, marketable,and not subject to obsolescence in order to be useful for inventoryloans. Some view inventory financing as a means of raisingadditional short-term funds after receivables financing has beenexhausted; however, it is standard practice in some industries,such as auto sales.Real-World Tip: An interesting discussion of inventory financingis the story of Tino De Angelis, who has come to be known as the“salad oil king.” Mr. De Angelis, a former butcher, constructed anempire with a reported value of $100 million (in 1963) basedlargely on his supposed acumen in buying and selling vegetableoil. The magnitude of his operation is apparent when you considerthat at one point, he had contracted to purchase 600 millionpounds of the product, or one-third of the total amount produceddomestically.Unfortunately, Mr. De Angelis’ business acumen was greatlyexaggerated. He resorted to borrowing against his inventory,which supposedly consisted of millions of gallons of vegetable oilheld in steel vats spread across New Jersey. Unfortunately for hiscreditors, the vats were largely empty. The resulting default caused millions of dollars in losses to banks, insurance companies,brokerage firms, and the New York Stock Exchange. Mr. DeAngelis was paroled in 1972 after serving seven years of a 20-yearprison sentence.C.Other Sources-Commercial paper – short-term publicly traded loans-Trade credit – accounts payableLecture Tip: In Corporate Liquidity, by Kenneth Parkinson andJarl Kallberg, commercial paper is called “the most importantsource of short-term borrowing for large U.S. companies.” Thecommercial paper market has grown dramatically over the last few years. Parkinson and Kallberg describe a typical commercialpaper transaction:-The issuer sells a note to an investor for an agreed-upon rate,principal (usually in $1 million increments), and maturity date(270 days or less).-The issuer contracts with the issuing bank to prepare the noteand deliver it to the investor’s custodial bank.-The investor instructs her bank to wire funds to thecommercial paper issuer upon delivery and verification of thenote. Since commercial paper is sold on a discounted basis, theamount of funds wired is less than the face amount of the note.-On the maturity date, the note is returned to the issuer’spaying agent and the face amount of the note is transferred tothe investor. The note is marked paid and returned to theissuer.18.6 A Short-Term Financial PlanSlide 25: Short-Term Financial PlanThe cash budget is used to determine how a firm will raise the cashto meet any cash deficits computed in the budget. It is also used todetermine when marketable security investments may benecessary. For temporary imbalances, short-term borrowing andmarketable securities are in order. For long-term short-falls,solutions include issuing bonds or equity. For long-term cashsurpluses, solutions include paying dividends, repurchasing shares,or refunding debt.18.7Summary and ConclusionsSlide 26: Quick QuizSlide 27: Ethics IssuesSlide 28: Comprehensive ProblemSlide 29: End of Chapter。
公司理财精要版原书第12版教师手册RWJ_Fund_12e_IM_Chapter22
Chapter 22BEHAVIORAL FINANCE: IMPLICATIONS FOR FINANCIAL MANAGEMENTSLIDES22.1Chapter 2222.2Key Concepts and Skills22.3Chapter Outline22.4Poor Outcomes22.5Overconfidence22.6Overconfidence and Stock Market Trading22.7Overconfidence and Gender22.8Overoptimism22.9Confirmation Bias22.10Framing Effects22.11Example: Frame Dependence22.12Example: Frame Dependence (ctd.)22.13Example: Loss Aversion22.14Example: Loss Aversion (ctd.)22.15Example: Mental Accounting22.16Example: Mental Accounting (ctd.)22.17Other Related Types of Judgment Errors22.18Other Related Types of Judgment Errors (ctd.)22.19Heuristics22.20Example: Representativeness and Randomness: “Hot Hand” in Basketball 22.21The Gambler’s Fallacy22.22Behavioral Finance and Market Efficiency22.23Limits to Arbitrage22.24Bubbles and Crashes22.25Money Manager Performance22.26Table 22.222.27Quick Quiz22.28Ethics Issues22.29Comprehensive Problem22.30End of ChapterCHAPTER WEB SITESCHAPTER ORGANIZATION22.1Introduction to Behavioral Finance22.2BiasesOverconfidenceOveroptimismConfirmation Bias22.3Framing EffectsLoss AversionHouse Money22.4HeuristicsThe Affect HeuristicThe Representativeness HeuristicRepresentativeness and RandomnessThe Gambler’s Fallacy22.5Behavioral Finance and Market EfficiencyLimits to ArbitrageBubbles and Crashes22.6Market Efficiency and the Performance of Professional Money Managers22.7Summary and ConclusionsANNOTATED CHAPTER OUTLINELecture Tip: In the chapter opener, the issue of market bubbles is presented,providing the specific example of the internet bubble in the late 1990s. Othersimilar situations exist; for example, consider the run in commodities (oil,gold, etc.) in 2007 and early 2008. However, it is good to point out to studentsthat the same condition may occur on the downside as well. So, just asinvestors may “herd” into an asset, they may also herd out of an asset. Be ingable to identify these biased actions may provide an “unbiased” investor (ifone exists) a competitive advantage.Slide 1: Chapter 22Slide 2: Key Concepts and SkillsSlide 3: Chapter Outline22.1.Introduction to Behavioral FinanceSlide 4: Poor OutcomesPoor outcomes may result from one of two issues:-You have made a good decision, but something happens that was anextremely unlikely event (i.e., you were unlucky)-You simply made a bad decision (cognitive error)Lecture Tip: Sometimes events occur that are beyond our control. We havepreviously discussed ways to review the potential outcomes of suchoccurrences. Thus, it may be helpful to remind students about activities suchas sensitivity and scenario analysis, as well as simulation techniques. Thischapter, hopefully, will help alleviate (or at least reduce) the second cause ofpoor outcomes.In the remainder of the chapter, we will explore three main categories ofcognitive error (often referred to as behavioral bias):-Biases-Framing effects-Heuristics22.2.BiasesA.OverconfidenceSlide 5: OverconfidenceSlide 6: Overconfidence and Stock Market TradingSlide 7: Overconfidence and GenderMost people are overconfident about one or more of their abilities:-80 percent of drivers consider themselves to be aboveaverage.-Individual investors (particularly men) tend to tradeexcessively, which actually produces underperformance.Lecture Tip: Overconfidence is tied to self-attribution bias, whichleads people to attribute success to their own skill, while poorresults are attributed to bad luck.Most business decisions require us to make judgments about thefuture, which is unknown. The most common occurrence ofoverconfidence is assuming that these forecasts about the futurecan be made with precision.B.OveroptimismSlide 8: Overoptimism-Overestimate the likelihood of a good outcome. In the context ofbusiness decisions, this would imply forecasting a higher NPVthan actually exists.-Related to overconfidence, but not exactly the same. For example,we could be overconfident of a negative occurrence (i.e., overpessimistic)C.Confirmation BiasSlide 9: Confirmation Bias-Occurs when more weight is given to information that agrees withour preexisting opinions22.3.Framing EffectsSlide 10: Framing EffectsHow a question is framed may determine the most likely responsethat is given.Ethics Note: Ask students to consider a political election with twocompeting candidates, one who is pro-life and the other who ispro-choice. Notice that both sides use the prefix pro- to frame theposition in a positive light. Ask the students how a pollsterrepresenting one side may frame a question differently thansomeone from the competing political camp. What does this say forthe potential accuracy of reported survey results? This issue has asimilar application for a company that is researching consumeropinions regarding its product—i.e., make sure that questions arenot worded (framed) so as to elicit a biased response.Lecture Tip: Historically, employees who were offered a company-sponsored retirement plan (such as a 401(k)) were required to optinto the plan. Thus, the default option was no participation. Underthis approach, less than 1/3 of employees participated. Thegovernment changed the allowable approach earlier this decade,allowing companies to default employees into the plan, whileoffering the choice to opt out. While there was no change to thechoice the employees faced, the way in which the situation wasframed significantly changed the participation rate, with over 2/3of employees participating. This is also an example of what isreferred to as the “endowment” effect.Slide 11: Example: Frame DependenceSlide 12: Example: Frame Dependence (ctd.)A.Loss Aversion-Focusing on gains and losses, rather than overall wealth, is a typeof narrow framing that leads to loss aversion-A lso referred to as the “break-even” effect, as individuals andcompanies hang on to bad investments too long, hoping somethingwill happen to help them avoid a loss. Obviously, this is in directcontrast to the issue of not including sunk costs in our decision-making process.Slide 13: Example: Loss AversionSlide 14: Example: Loss Aversion (ctd.)Lecture Tip: Terrance Odean, in “Are Investors Reluctant toRealize Their Losses” (Journal of Finance, 1998), finds thatinvestors sell winning stocks to early and retain poorly performingstocks too long, resulting in a lower portfolio return.B.House MoneyGamblers are more likely to take big risks with money they havewon from the casino than with the money they brought from home.However, once the money is won, that money is yours, so there isno difference as they are both forms of wealth.Slide 15: Example: Mental AccountingSlide 16: Example: Mental Accounting (ctd.)Just like investors associate a stock with its purchase price,managers may associate a project with its original cost andmentally account for relative gains and losses over time. Thiscreates a “personal relationship” with the investment that makes itharder to liquidate, even if it were in the best financial interest todo so.Slide 17: Other Related Types of Judgment ErrorsSlide 18: Other Related Types of Judgment Errors (ctd.)Other related types of judgment errors include:•Myopic loss aversion: the tendency to focus on avoidingshort-term losses, even at the expense of long-term gains•Regret aversion: the tendency to avoid making a decisionbecause you fear that, in hindsight, the decision would havebeen less than optimal•Endowment effect: the tendency to consider something thatyou own to be worth more than it would be if you did notown it•Money illusion: confused between real buying power andnominal buying power (i.e., inflation effects)22.4.HeuristicsSlide 19: Heuristics-Rules of thumb (or mental shortcuts) used to make decisionsAn example is accepting projects with a payback of two years, withoutperforming any time value analysis. The decision may be right in manycases, but it may lead to poor outcomes.A.The Affect Heuristic-The reliance on instinct (or emotions), rather than analysis, tomake decisionsB.The Representativeness Heuristic-Reliance on stereotypes or limited samples to form opinions aboutan entire groupLecture Tip: Consider a firm that makes a successful investment inthe country of Russia, then assumes that all future investments inthe country will be successful. Ask students what could be differentabout subsequent investments that would render this assertionincorrect.C.Representativeness and RandomnessSlide 20: Example: Representativeness and Randomness: “Hot Hand” in Basketball-Perceiving patterns where none existLecture Tip: Remind students about the implication of marketefficiency for technical analysis; then discuss howrepresentativeness may increase the perceived attractiveness ofsuch an approach.D.The Gambler’s FallacySlide 21: The Gambler’s Fallacy-Assuming that a departure from average will be corrected in theshort-termSuppose a coin is flipped five times in a row, each resulting in ahead. Someone experiencing gambler’s fallacy will be prone tobelieve it is more likely that the next flip will be a tail, even thoughit is an independent event with a 50/50 chance.Other related biases include:Law of small numbers – small sample always representslong run distributionRecency bias – recent events are given more importanceLecture Tip: In 2008, there was a great amount of floodingacross the Midwest, with many areas experiencing “500-year” floods. Ask what an individual exhibiting recencybias would be prone to do regarding flood insurance (takeout added coverage). Contrast this to someone who isdisplaying signs of gambler’s fallacy (reduce coverage).Anchoring and adjustment – unable to appropriatelyaccount for new informationAversion to ambiguity – shy away from the unknownFalse consensus – believe other people have the sameopinions as your ownAvailability bias – put too much weight on information thatis easily available22.5.Behavioral Finance and Market EfficiencySlide 22: Behavioral Finance and Market EfficiencyIf many traders behave in a way that is economically irrational (i.e.,exhibit behavioral bias), then are markets really efficient?-The efficient markets hypothesis does not require every investorto be rationalA.Limits to ArbitrageSlide 23: Limits to ArbitrageIf only one investor was rational, s/he could keep the marketefficient if s/he had sufficient resources to arbitrage irrationalpricing effects. However, this would require unlimited capital.There are more basic limits to arbitrage:Firm-specific risk: an unanticipated firm event could offsetany potential arbitrage gainsNoise trader risk: unsophisticated investors “herd” in theirdecisionsKeynes: “Market s can remain irrational longer thanyou can remain solvent.”Implementation costs: transaction costs may make arbitragetoo costlyExamples:(1)3Com / Palm - shares of spinoff firm traded at a higher valuethan the actual firm itselfLecture Tip: A potential explanation is that limited availabilitymade it effectively impossible to short the shares and bringprices back to rational levels.(2)Royal Dutch / Shell – prices consistently deviated from ratio ofmerged firm valuesB.Bubbles and CrashesSlide 24: Bubbles and CrashesBubble – market prices exceed the level that normal, rationalanalysis would suggestCrash – significant, sudden drop in market-wide values; generallyassociated with the end of a bubbleSome examples of crashes:-October 29, 1929-October 19, 1987-Asian crash-“Dot-com” bubble and crashLecture Tip: Although the 1987 crash still represents the largestsingle day percentage drop, the largest point drop (on the Dow)occurred on September 29, 2008 (778 points) following the Houseof Representatives refusal to pass the “bailout” packageassociated with the mortgage and credit crisis.Lecture Tip: The first bubble was recorded in 1637, as the Dutchexperienced “Tulip Mania,” pushing the price of the rarest tulipbulb to 20 times that of a skilled craftsman’s yearly wage. Themarket suddenly collapsed after approximately six months.22.6.Market Efficiency and the Performance of Professional Money Managers Slide 25: Money Manager PerformanceSlide 26: Table 22.2If markets are efficient, then passively managed index funds should be asgood an investment as an actively managed fund. Stated differently, itshould be difficult for active managers to outperform the market.History suggests that this is what happens, as there are very few examplesof managers who have consistently outperformed the market. Further, it isimpossible to determine ahead of time who these managers will be.So, even if markets are not perfectly efficient, there does appear to be arelatively high degree of efficiency.22.7.Summary and Conclusions Slide 27: Quick QuizSlide 28: Ethics IssuesSlide 29: Comprehensive Problem Slide 30: End of Chapter。
公司理财(精要版·原书第12版)PPT中文Ch24 期权定价
保护性看跌期权
• 同时购买标的资产和一份看跌期权，以防止标的资产价 值下跌。
• 支付看跌期权溢价以抑制下跌风险。 • 类似于支付保险费以减轻潜在的损失 • 在需要保价的标的资产和为购买期权所支付的价格之间
进行权衡
24-4
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
另一种策略
• 你可以买一个看涨期权，然后用执行价格的现值投资于 无风险资产。
• 如果资产价值增加，你可以使用看涨期权和投资的无风 险资产来购买这份资产。
• 如果资产价值下降，你选择不行使期权，仍然拥有投资 的无风险资产。
24-5
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
24-16
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
看跌期权定价
• 将看跌期权看作看涨期权，用布莱克-斯科尔斯模型为其 估值。然后，用买卖期权平价关系来确定看跌期权的价 值。 ▪ 之前示例中看跌期权的价值是多少？
公司理财精要版原书第12版英文版最新精品课件Ross_12e_PPT_Ch21
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
EXCHANGE RATES
• The price of one country’s currency in terms of another country’s currency
• Most currency is quoted in terms of dollars.
• Consider the following quote:
▪ Euro
1.1836
0.8449
▪ The first number (1.1836) is how many U.S. dollars it takes to buy 1 Euro.
▪ The second number (0.8449) is how many Euros it takes to buy $1.
批注本地保存成功开通会员云端永久保存去开通
CHAPTER 21
INTERNATIONAL CORPORATE FINANCE
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
• Illustrate the different types of exchange rate risk and ways firms manage exchange rate risk
公司理财精要版原书第12版英文版最新精品课件Ross_12e_PPT_Ch24
OPTION VALUATION
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
• Similar to paying an insurance premium to protect against potential loss
• Trade-off between the amount of protection and the price that you pay for the option
EXAMPLE: FINDING THE CALL PRICE
• You have looked in the financial press and found the following information:
▪ Current stock price = $50 ▪ Put price = $1.15 ▪ Exercise price = $45 ▪ Risk-free rate = 5% ▪ Expiration in 1 year
• Call + PV(E)
▪ PV(E) will be worth E at expiration of the option ▪ If S < E, let call expire and have investment, E ▪ If S ≥ E, exercise call using the investment and have S
▪ PV = 100e-0.08(3/12) = 98.02
公司理财(精要版·原书第12版)PPT中文Ch01公司理财概论
学习目标
• 财务管理决策的基本类型和财务经理的作用 • 财务管理的目标 • 不同组织形态的企业的财务影响 • 经理和所有者之间的利益冲突
1-2
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
管理经理
• 经理人薪酬
▪ 激励可以用来协调管理层和股东的利益。 ▪ 激励机制需要精心设计，以确保实现目标。
• 企业的控制
▪ 接管的威胁可能会导致更好的管理。
• 其他利益相关者
1-13
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
独资制
• 优点
▪ 易于组建
▪ 管制最少 ▪ 独资企业的所有者保留
企业全部的利润
▪ 所有企业的全部收入都 视同个人所得而纳税
• 缺点
▪ 限于所有者的寿命 ▪ 可以筹集到的权益金额
限于所有者个人财富的 金额
▪ 无限责任
▪ 所有权的转让困难
1-8
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
公司理财精要版原书第12版英文版最新精品课件Ross_12e_PPT_Ch11
MAKING A DECISION
• Beware “Paralysis of Analysis” • At some point you have to make a decision. • If the majority of your scenarios have positive NPVs,
Even • Operating Leverage • Capital Rationing
11-3
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
SCENARIO ANALYSIS
• What happens to the NPV under different cash flow scenarios?
• At the very least, look at:
▪ Best case – high revenues, low costs ▪ Worst case – low revenues, high costs ▪ Measures of the range of possible outcomes
• The greater the volatility in NPV in relation to a specific variable, the larger the forecasting risk associated with that variable, and the more attention we want to pay to its estimation.
公司理财精要版原书第12版英文版最新精品课件Ross_12e_PPT_Ch25
• Consolidation
▪ Entirely new firm is created from combination of existing firms.
25-6
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
KEY CONCEPTS AND SKILLS
• Discuss the different types of mergers and acquisitions, why they should (or shouldn’t) take place, and the terminology associated with them
ACQUISITION OF ASSETS
• A firm can acquire another firm by buying most or all of its assets.
• In this case, the target firm still exists unless the stockholders choose to dissolve it.
CLASSIFICATIONS OF ACQUISITIONS
• Three types of acquisitions according to financial analysts:
▪ Horizontal – both firms are in the same industry
公司理财精要版原书第12版英文版最新精品课件Ross_12e_PPT_Ch06_Formulas
DISCOUNTED CASH FLOW VALUATION (FORMULAS)
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
6F-3
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
6F-9
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
MULTIPLE CASH FLOWS – FV (EXAMPLE 6.1, CTD.)
• Find the value at year 3 of each cash flow and add them together. ▪ Today (year 0): FV = 7000(1.08)3 = 8,817.98 ▪ Year 1: FV = 4,000(1.08)2 = 4,665.60 ▪ Year 2: FV = 4,000(1.08) = 4,320 ▪ Year 3: value = 4,000 ▪ Total value in 3 years = 8,817.98 + 4,665.60 + 4,320 + 4,000 = 21,803.58
公司理财精要版原书第12版教师手册RWJ_Fund_12e_IM_Chapter24
CHAPTER 24OPTION VALUATIONSLIDES24.1 Chapter 2424.2 Key Concepts and Skills24.3 Chapter Outline24.4 Protective Put24.5 An Alternative strategy24.6 Comparing the Strategies24.7 Put-Call Parity24.8 Example: Finding the Call Price24.9 Continuous Compounding24.10 Example: Continuous Compounding24.11 Example: PCP with Continuous Compounding24.12 Black-Scholes Option Pricing Model24.13 Example: Black-Scholes OPM24.14 Example: Black-Scholes OPM in a Spreadsheet24.15 Put Values24.16 European vs. American Options24.17 Table 24.424.18 Varying Stock Price and Delta24.19 Work the Web Example24.20 Figure 24.1 Option Prices vs. Stock Price24.21 Example: Delta24.22 Varying Time to Expiration and Theta24.23 Figure 24.2 Option Prices vs. Time to Expiration24.24 Example: Time Premiums24.25 Varying Standard Deviation and Vega24.26 Figure 24.3 Option Prices vs. Return Standard Deviation 24.27 Varying the Risk-free Rate and Rho24.28 Figure 24.4 Option Prices vs. Risk-free Interest Rate 24.29 Implied Standard Deviations24.30 Work the Web Example – 224.31 Equity as a Call Option24.32 Valuing Equity and Changes in Assets24.33 Put-Call Parity and the Balance Sheet Identity24.34 Mergers and Diversification24.35 Extended Example – Part I24.36 Extended Example – Part II24.37 Extended Example – Part III24.38 M&A Conclusions24.39 Extended Example: Low NPV – Part I24.40 Extended Example: Low NPV – Part II24.41 Extended Example: Low NPV – Part III24.42 Extended Example: Negative NPV – Part I24.43 Extended Example: Negative NPV – Part II24.44 Extended Example: Negative NPV – Part III24.45 Extended Example: Negative NPV – Part IV24.46 Conclusions24.47 Quick Quiz24.48 Ethics Issues24.49 Comprehensive Problem24.50 End of ChapterCHAPTER WEB SITESCHAPTER ORGANIZATION24.1 Put-Call ParityProtective PutsAn Alternative StrategyThe ResultContinuous Compounding: A Refresher Course 24.2 The Black-Scholes Option Pricing ModelThe Call Option Pricing FormulaPut Option ValuationA Cautionary Note24.3 More about Black-ScholesVarying the Stock PriceVarying the Time to ExpirationVarying the Standard DeviationVarying the Risk-Free RateImplied Standard Deviations24.4 Valuation of Equity and Debt in a Leveraged FirmValuing the Equity in a Leveraged FirmOptions and the Valuation of Risky Bonds 24.5 Options and Corporate Decisions: Some ApplicationsMergers and DiversificationOptions and Capital Budgeting24.6 Summary and ConclusionsANNOTATED CHAPTER OULTINESlide 1: Chapter 24Slide 2: Key Concepts and SkillsSlide 3: Chapter Outline25.1 Put-Call ParityTerminology Review:Call – right, but not the obligation, to buy the underlying asset at thespecified price on or before a specified datePut – right, but not the obligation, to sell the underlying asset at the specifiedprice on or before a specified dateExercise or strike price – price specified in the option contractA.Protective PutsSlide 4: Protective PutThe strategy:Buy one share of stock at price, S.Buy one put option with strike price, E, and put premium, P.Example: Suppose you buy Citigroup stock for $45, and at thesame time, you purchase a put option with a strike price of $40.You pay $1.80 for the option, and it expires in one year. You planto sell the stock in one year.Consider the following possible payoffs:Stock Price Put Value Combined Value Total Gain or Loss25 15 40 −5.8030 10 40 −5.8035 5 40 −5.8040 0 40 −5.8045 0 45 −1.80Stock Price Put Value Combined Value Total Gain or Loss50 0 50 +3.2055 0 55 +8.2060 0 60 +13.2065 0 65 +18.20The maximum loss has been limited to $5.80.B.An Alternative StrategySlide 5: An Alternative StrategySuppose, instead, you buy a call option with a strike price of E anda call price of C. You invest the remainder in a Treasury Bill.Example: A $40 call option on Citigroup stock is selling for $7.78,and the T-bill has an interest rate of 2.5%. We want to look at thesame investment as in part A, so you invest a total of $46.80. So,you invest 46.80 − 7.78 = 39.02 in T-bills. Consider the payoffs.Combined Value Total Gain or Loss Stock Price Call Value T-bill39.02(1.025)25 0 40 40 −5.8030 0 40 40 −5.8035 0 40 40 −5.8040 0 40 40 −5.8045 5 40 45 −1.8050 10 40 50 +3.2055 15 40 55 +8.2060 20 40 60 +13.2065 25 40 65 +18.20The payoffs are the same with both strategies.C.The ResultSlide 6: Comparing the StrategiesIf the combined value is the same at the end, under all situations,then the cost today must be the same.Slide 7: Put-Call ParityThis leads to the famous put-call parity (PCP) condition:S + P = C + PV(E)where the present value is computed using the risk-free rate. Slide 8: Example: Finding the Call PriceThe PCP condition can be rearranged to solve for any of thecomponents.D.Continuous Compounding: A Refresher CourseSlide 9: Continuous CompoundingEffective annual rate with continuous compounding:EAR = e q– 1where q is the quoted rate.Suppose you have a quoted rate of 5% per year with continuouscompounding:EAR = e.05− 1 = .05127 or 5.127%Time value of money calculations with continuous compounding:FV = PVe RtPV = FVe-Rtwhere R = continuously compounded rate, and t = number ofperiods in terms of yearsSlide 10: Example: Continuous CompoundingExample: What is the present value of $1000 to be received inthree months if the annual continuously compounded rate is 8%?PV = 1000e-.08(3/12) = 980.20Slide 11: Example: PCP with Continuous CompoundingPCP with continuous compoundingS + P = C + Ee−RtExample: Given the following, what does the call have to sell forto prevent arbitrage?S = 80; P = 6; E = 85; R = 10% with continuous compounding; t =9 months (9/12)80 + 6 = C + 85e−.1(9/12)C = 86 − 78.86 = 7.1424.2The Black-Scholes Option Pricing ModelA. The Call Option Pricing Formula Slide 12:Black-Scholes Option Pricing ModelThe Formula: C = SN(d 1) − Ee −Rt N(d 2) where N(d 1) and N(d 2) are probabilities that we compute using the following formulas and then look the numbers up in the standard normal tables. where σ is the standard deviation (or volatility) of the underlying asset returns. Slide 13:Example: Black-Scholes OPMExample: Consider a stock that is currently selling for $35. You are looking at a call option that has an exercise price of $30 and expires in 6 months. The risk-free rate is 4%, compounded continuously. The volatility of stock returns is .25. What is the call price? ()89675.12625.07353.1d 07353.112625.126225.04.3035ln d 221=-==⎪⎪⎭⎫ ⎝⎛++⎪⎭⎫ ⎝⎛= From Table 24.3 N(d 1) = N(1.07) = (.8554 + .8599)/2 = .8577 N(d 2) = N(.90) = .8159 C = 35(.8577) – 30e -.04(6/12)(.8159) = $6.03t σd d t σt 2σR E S ln d 1221-=⎪⎪⎭⎫ ⎝⎛++⎪⎭⎫ ⎝⎛=Slide 14: Example: Black-Scholes OPM in a SpreadsheetB.Put Option ValuationSlide 15: Put ValuesLecture Tip: The Black-Scholes model can also be adjusted tosolve for the value of a put option directly.P = Ee−Rt N(−d2) − SN(−d1)where d1 and d2 are computed as before. You just change the signbefore looking it up in the table.As an example, consider the previous information but find thevalue of a put instead of a call.N(−d1) = N(−1.07) = (.1401 + .1446) ⁄ 2 = .1424N(−d2) = N(−.9) = .1841P = 30e−.04(6/12)(.1841) − 35(.1424) = $0.43A slightly different answer will be found below using the PCP. Thedifference is due to rounding.Example: Consider the previous call option example and use put-call parity to find the value of the put.S + P = C + PV(E)35 + P = 6.03 + 30e−.04(6/12)P = $0.44C. A Cautionary NoteSlide 16: European vs. American OptionsBoth PCP and the Black-Scholes model are strictly for Europeanoptions that can be exercised only at expiration. There are timeswhen it would be optimal to exercise a put option early, but thesemodels will not capture that additional value, called the “earlyexercise premium.”24.3 More about Black-ScholesSlide 17: Table 24.4Table 24.4 illustrates the relationship between option values andthe five major inputs.A.Varying the Stock PriceSlide 18: Varying Stock Price and DeltaSlide 19: Work the Web ExampleSlide 20: Figure 24.1 Option Prices vs. Stock PriceSlide 21: Example: DeltaCall prices have a direct relationship with the stock price, while putprices have an inverse relationship. This relationship is calleddelta.For European options:Call delta = N(d1)Put delta = N(d1) − 1You can use delta to estimate the new option value given a smallchange in the stock price.Lecture Tip: Delta is the first derivative of the OPM with respectto S. Gamma is the second derivative with respect to S.An option’s delta changes as S changes, and gamma measures therate of change. Delta is often used to determine how many optionsare needed to hedge a portfolio. As S changes, the number ofoptions needed will change because delta depends on S.The larger the gamma, the smaller the change in S required tocause a significant change in delta. The larger the change in delta,the greater the need to rebalance the portfolio and the higher thetrading costs. Therefore, portfolio managers will often look at boththe gamma and the delta when deciding which options to use forhedging.B.Varying the Time to ExpirationSlide 22: Varying Time to Expiration and ThetaSlide 23: Figure 24.2 Option Prices vs. Time to ExpirationFor American calls and puts, the value of the option increases asthe time to expiration increases.It is never optimal to exercise call options on non-dividend payingstocks early. Therefore, the value of a European call will alsoincrease as time increases.However, it may be optimal to exercise a put option early, and aEuropean put prevents early exercise. Therefore, there aresituations in which a shorter time to expiration would actually bemore valuable, and the relationship between European put valueand time is ambiguous.The relationship between option value and time to expiration iscalled theta.Intrinsic valuecall: max[S − E, 0]put: max[E − S, 0]Option value = Intrinsic value + Time premiumTime premium – option value associated with the time left toexpiration, decreases as expiration approachesSlide 24: Example: Time PremiumsExample: Consider the previous option valuation examples. Whatis the intrinsic value and the time premium for each option?Call: C = 6.03intrinsic value = max[35 − 30, 0] = 5time premium = 6.03 − 5 = 1.03Put: P = .44intrinsic value = max[30 − 35, 0] = 0time premium = .44 − 0 = .44C.Varying the Standard DeviationSlide 25: Varying Standard Deviation and VegaSlide 26: Figure 24.3 Option Prices vs. Return Standard DeviationThe relationship between volatility and option value is called vega.As volatility increases, the value of the option increases.The potential loss is limited to your premium. However, the greaterthe volatility, the larger the potential gain.D.Varying the Risk-Free RateSlide 27: Varying the Risk-free Rate and RhoSlide 28: Figure 24.4 Option Prices vs. Risk-free Interest RateThe value of a call increases as the risk-free rate increases. Theopposite is true for puts. However, the impact is very small,especially for “realistic” rates.The relationship between the risk-free rate and option value iscalled rho.E.Implied Standard DeviationsSlide 29: Implied Standard DeviationsSlide 30: Work the Web ExampleWe can observe option values, underlying asset values, exerciseprices, and risk-free rates in the market. The one variable that isnot observable is the standard deviation, or volatility.The OPM can be used to estimate the expected standard deviationof returns – called the implied standard deviation or impliedvolatility.There is not a closed-form solution—the easiest way to find theimplied volatility is to use an options calculator.24.4 Valuation of Equity and Debt in a Leveraged FirmSlide 31: Equity as a Call OptionEquity can be viewed as a call option on the assets of a business.When a debt payment is due, stockholders can choose not toexercise the option and the assets pass to the bondholders.Paying off the debt is the same as exercising the option.A.Valuing the Equity in a Leveraged FirmSlide 32: Valuing Equity and Changes in AssetsExample: For simplicity, assume a firm has a 5-year, zero coupon bond with a face value of $20 million. The firm’s assets have a market value of $30 million. The volatility of asset returns is .3, and the continuously compounded risk-free rate is 5%. What is the market value of equity? Of debt? S = 30; E = 20; t = 5; σ = .3; R = .05 N(1.31) = (.9032 + .9066) ⁄ 2 = .9049 N(.64) = .7389 Equity = 30(.9049) − 20e −.05(5)(.7389) = 15.63788 million Debt = 30 − 15.63788 = 14.36212 millionWhat is the firm’s cost of debt? 14.36212 = 20e −R(5) R = .06623 = 6.623%B. Options and the Valuation of Risky Bonds A protective put can be used to reduce the risk of bonds. Buy a put with an exercise price of $20 million Value of risky bond + put = value of risk-free bond 14.36212 + P = 20e −.05(5) P = 1.2139 million Increasing the value of the put decreases the value of the risky bond. Slide 33:Put-Call Parity and the Balance Sheet IdentityValue of debt = Value of risk-free debt − Put Debt = Ee −Rt − PPCP: S + P = C + Ee −RtS = C + (Ee −Rt − P)()()64.53.31.1d 31.153.523.05.2030ln d 221=-==⎪⎪⎭⎫ ⎝⎛++⎪⎭⎫ ⎝⎛=Assets = Equity + DebtPCP and the balance sheet identity are the same.24.4 Options and Corporate Decisions: Some ApplicationsC.Mergers and DiversificationSlide 34: Mergers and DiversificationSlide 35: Extended Example – Part ISlide 36: Extended Example – Part IISlide 37: Extended Example – Part IIIUse option valuation to investigate whether diversification is agood reason for a merger from a stockholder’s viewpoint.If synergies do not exist, then a merger will reduce volatilitywithout increasing cash flow.Decreasing volatility decreases the value of the call option (equity)and the put option. Decreasing the value of the put increases thevalue of the debt.Slide 38: M&A ConclusionsSo, a merger for diversification reasons, transfers value from thestockholders to the bondholders.D.Options and Capital BudgetingSlide 39: Extended Example: Low NPV – Part ISlide 40: Extended Example: Low NPV – Part IISlide 41: Extended Example: Low NPV – Part IIIIf a firm has a substantial amount of debt, stockholders may preferriskier projects, even if they have a lower NPV.The riskier project increases the volatility of the asset returns. Theincreased volatility increases the value of the call (equity) and theput. The increased put value decreases the value of the debt. Thistransfers wealth from the bondholders to the stockholders.Slide 42: Extended Example: Negative NPV – Part ISlide 43: Extended Example: Negative NPV – Part IISlide 44: Extended Example: Negative NPV – Part IIISlide 45: Extended Example: Negative NPV – Part IVStockholders may even prefer a negative NPV project if itincreases volatility enough.The wealth transfer from bondholders to stockholders mayoutweigh the negative NPV.Slide 46: ConclusionsLecture Tip: Bondholders recognize the desire of stockholders totake on riskier projects. Consequently, provisions are put into thebond indentures to try to prevent this wealth transfer. Theseprovisions add to the firm’s cost either directly through a higherinterest rate or through additional monitoring costs. These costsare all considered agency costs.24.5 Summary and ConclusionsSlide 47: Quick QuizSlide 48: Ethics IssuesSlide 49: Comprehensive ProblemSlide 50: End of Chapter。
公司理财精要版原书第12版教师手册RWJ_Fund_12e_IM_Chapter20_Appendi
Appendix 20AMORE ABOUT CREDIT POLICY ANALYSISSLIDES20A.1 Chapter 20 Appendix20A.2 Alternative Credit Policy Analysis20A.3 Discounts and Default Risk20A.4 End of ChapterAPPENDIX ORGANIZATION20A.1 Two Alternative Approaches20A.2 Discounts and Default RiskANNOTATED APPENDIX OUTLINESlide 1: Appendix 20A20A.1 Two Alternative ApproachesSlide 2: Alternative Credit Policy Analysis1. The One Shot ApproachDo not switch policy: Cash flow = (P − v)QSwitch policy: invest vQ' now, receive PQ' next periodPresent value of switch net cash flow: PQ'⁄ (1 + R) − vQ'NPV = present value of switch net cash flow – no switch cash flowNPV = PQ'⁄ (1 + R) − vQ'− (P − v)QThe firm gets the NPV now and in every period, giving:PQ'⁄ (1 + R) − vQ'− (P − v)Q + [ PQ'⁄ (1 + R) − vQ'− (P − v)Q] ⁄ RThis reduces to: −[PQ + v(Q'− Q)] + (P − v)(Q'− Q) ⁄ R2. The Accounts Receivable ApproachPeriodic benefit: (P − v)(Q'− Q)Incremental investment in receivables: PQ + v(Q'− Q)Carrying cost per period: [PQ + v(Q'− Q)] × RNet benefit per period: (P – v)( Q' - Q) – {[PQ + v(Q' - Q)]*R} NPV = [(P − v)( Q'−Q) − [PQ + v(Q'− Q)] × R] ⁄ RThis reduces to: −[PQ + v(Q'− Q)] + (P − v)(Q'− Q) ⁄ RNote that both methods simplify to the same equation that we hadearlier.Example: Suppose we have the following information for GriffieInternational, which is considering a change from no credit terms toterms of net 20. P = 100; v = 75; Q = 1,000; Q' = 1,050; R = 1.5% for20 daysNPV = −[100 × 1,000 + 75(1,050 − 1,000)] + (100 − 75)(1,050 −1,000) ⁄ .015 = −$20,416.67To break-even, Griffie needs to sell 63 units more than its unit saleswithout extending credit.20A.2 Discounts and Default RiskSlide 3: Discounts and Default RiskDefine:π = percentage of credit sales that go uncollectedd = percentage discount allowed for cash customersP' = credit price (no discount)P = cash price = P'(1 – d)Assuming no change in Q, then:Net incremental cash flow = [(1 −π)P'−v]Q − (P − v)Q = P'Q(d −π)NPV = −PQ + P'Q(d −π) ⁄ RA break-even application: π= d − R(1 − d) is the break-even defaultrate.Slide 4: End of Chapter。
公司理财精要版原书第12版教师手册RWJ_Fund_12e_IM_Chapter16
Chapter 16FINANCIAL LEVERAGE AND CAPITAL STRUCTURE POLICYSLIDES16.1Chapter 1616.2Key Concepts and Skills16.3Chapter Outline16.4Capital Restructuring16.5Choosing a Capital Structure16.6The Effect of Leverage16.7Example: Financial Leverage, EPS and ROE – Part I16.8Example: Financial Leverage, EPS and ROE – Part II16.9Break-Even EBIT16.10Example: Break-Even EBIT16.11Corporate Borrowing Conclusions16.12Corporate Borrowing and Homemade Leverage16.13Example: Homemade Leverage16.14Table 16.516.15Capital Structure Theory16.16Capital Structure Theory under Three Special Cases16.17Case I – Propositions I and II16.18Case I – Equations16.19Figure 16.316.20Example: Case I16.21The CAPM, the SML and Proposition II16.22Business Risk and Financial Risk16.23Case II – Cash Flow16.24Example: Case II16.25Interest Tax Shield16.26Case II – Proposition I16.27Example: Case II – Proposition I16.28Figure 16.416.29Case II – Proposition II16.30Example: Case II – Proposition II16.31Figure 16.516.32Case III16.33Bankruptcy Costs16.34More Bankruptcy Costs16.35Figure 16.616.36Figure 16.716.37Conclusions16.38Figure 16.816.39Managerial Recommendations16.40Figure 16.916.41The Value of the Firm16.42The Pecking-Order Theory16.43Observed Capital Structure16.44Work the Web Example16.45Bankruptcy Process – Part I16.46Bankruptcy Process – Part II16.47Quick Quiz16.48Ethics Issues16.49Comprehensive Problem16.50End of ChapterCHAPTER WEB SITESCHAPTER ORGANIZATION16.1The Capital Structure QuestionFirm Value and Stock Value: An ExampleCapital Structure and the Cost of Capital16.2The Effect of Financial LeverageThe Basics of Financial LeverageCorporate Borrowing and Homemade Leverage16.3Capital Structure and the Cost of Equity CapitalM&M Proposition I: The Pie ModelThe Cost of Equity and Financial Leverage: M&M Proposition IIBusiness and Financial Risk16.4M&M Propositions I and II with Corporate TaxesThe Interest Tax ShieldTaxes and M&M Proposition ITaxes, the WACC, and Proposition IIConclusion16.5Bankruptcy CostsDirect Bankruptcy CostsIndirect Bankruptcy Costs16.6Optimal Capital StructureThe Static Theory of Capital StructureOptimal Capital Structure and the Cost of CapitalOptimal Capital Structure: A RecapCapital Structure: Some Managerial Recommendations16.7The Pie AgainThe Extended Pie ModelMarketed Claims versus Nonmarketed Claims16.8The Pecking-Order TheoryInternal Financing and the Pecking OrderImplications of the Pecking Order16.9Observed Capital Structures16.10 A Quick Look at the Bankruptcy ProcessLiquidation and ReorganizationFinancial Management and the Bankruptcy ProcessAgreements to Avoid Bankruptcy16.11Summary and ConclusionsANNOTATED CHAPTER OUTLINESlide 1: Chapter 16Slide 2: Key Concepts and SkillsSlide 3: Chapter Outline16.1.The Capital Structure QuestionSlide 4: Capital RestructuringA.Firm Value and Stock Value: An ExampleThe value of the firm equals the market value of the debt plus themarket value of the equity (firm value identity). This is just V = D+ E. When the market value of debt is given and constant, anychange in the value of the firm results in an identical change in thevalue of the equity. The key to this reasoning lies in the fixednature of debt and the derivative nature of stock. (In a futurechapter, you will cover the topic of viewing a firm’s equity as acall option on the firm’s assets.)B.Capital Structure and the Cost of CapitalSlide 5: Choosing a Capital StructureThe “optimal” or “target” capital structure is that debt/equity mixthat simultaneously (a) maximizes the value of the firm, (b)minimizes the weighted average cost of capital, and (c) maximizesthe market value of the common stock.Maximizing the value of the firm is the goal of managing capitalstructure.Lecture Tip: Students sometimes fail to understand the mechanicsof why “minimizing WACC maximizes firm value.” Remindstudents that a firm is just a portfolio of projects, some withpositive NPVs and some with negative NPVs when evaluated at theWACC. The value of the firm is the sum of the NPVs of itscomponent projects. We already know that lower discount ratesincrease NPVs; consequently, decreasing the WACC will increasefirm value.16.2.The Effect of Financial LeverageSlide 6: The Effect of LeverageA.The Basics of Financial LeverageExample (additional example from the one in the book)Current Proposed Assets $5,000,000 $5,000,000Debt 0 2,500,000Equity 5,000,000 2,500,000D/E ratio 0 1 Share price (assume it doesn’t change when$10 $10shares are repurchased)Shares outstanding 500,000 250,000Interest Rate N/A 10% Slide 7: Example: Financial Leverage, EPS and ROE – Part ISlide 8: Example: Financial Leverage, EPS and ROE – Part IICurrent capital structure: No debtRecession Expected ExpansionEBIT $300,000 $650,000 $1,000,000Interest Expense 0 0 0Net Income $300,000 $650,000 $1,000,000ROE 6% 13% 20%EPS $0.60 $1.30 $2.00Proposed capital structure: D/E = 1; interest rate = 10%Recession Expected ExpansionEBIT $300,000 $650,000 $1,000,000Interest Expense 250,000 250,000 250,000Net Income $50,000 $400,000 $750,000ROE 2% 16% 30%EPS $0.20 $1.60 $3.00Slide 9: Break-Even EBITSlide 10: Example: Break-Even EBITLecture Tip: You may wish to provide the following example tobetter solidify the students’ understanding of the variability inROE due to leverage. Ask the class to consider the differencebetween ROE and ROA for an all equity firm given various saleslevels. It’s easy to show that ROE = ROA in this case because totalequity = total assets. The substitution of debt for equity results inROE equaling ROA at only one level of sales. The fixed interestexpense and lower number of common shares outstanding causeROE to change by a larger percentage than the change in ROA forany given change in sales.Slide 11: Corporate Borrowing ConclusionsWe can conclude that:-The effect of financial leverage depends on EBIT-Financial leverage increases ROE and EPS when EBIT isgreater than the cross-over point-The variability of EPS and ROE is increased as leverageincreasesLecture Tip: Many students feel that if a company expects toachieve the break-even EBIT, it should automatically issue debt.You should emphasize that this is a break-even point relative toEBIT and EPS. Beyond this point, EPS will be larger under thedebt alternative, but with additional debt, the firm will haveadditional financial risk that would increase the required return onits common stock. A higher required return might offsetthe increase in EPS, resulting in a lower firm value despite thehigher EPS. The M&M models, described in upcoming sections,will offer key points to make about this relationship.B.Corporate Borrowing and Homemade LeverageSlide 12: Corporate Borrowing and Homemade LeverageHomemade leverage – if all market participants have equal accessto the capital markets, there’s nothing sp ecial about corporateborrowingSlide 13: Example: Homemade LeverageSlide 14: Table 16.5Suppose the firm in the previous example does not change itscapital structure. An investor can replicate the returns of theproposed borrowing by making her own D/E ratio equal to 1 forthe investment. Suppose an investor buys 50 shares with her ownmoney and 50 shares by borrowing $500 at 10% interest. Thepayoffs are:Recession Expected Expansion EPS – unlevered firm $0.60 $1.30 $2.00Earnings for 100 shares $60.00 $130.00 $200.00Less interest on $500 at 10% 50.00 50.00 50.00Net earnings $10.00 $80.00 $150.00Return on investment = net earnings / $500 2% 16% 30%The investor has been able to convert her return to what she wouldhave gotten if the company had undertaken the proposed capitalstructure and she had just purchased $500 worth of stock.Suppose instead the firm does switch to the proposed capitalstructure. An investor can “unlever” the firm by purchasing boththe firm’s stock and bonds. Consider an investor who invests $250in the stock and $250 in the bonds paying 10%. (Note that in bothsituations, the investor’s total cash outlay is $500.)Recession Expected Expansion EPS – levered firm $0.20 $1.60 $3.00Earnings for 25 shares 5.00 40.00 75.00Plus interest on $250 at 10% 25.00 25.00 25.00Net earnings $30.00 $65.00 $100.006% 13% 20% Return on investment = net earnings /$500In this case, the investor is able to earn the same return as shewould have earned if the firm did not change capital structure andshe just invested in stock.16.3.Capital Structure and the Cost of Equity CapitalSlide 15: Capital Structure TheorySlide 16: Capital Structure Theory under Three Special CasesA.M&M Proposition I: The Pie ModelSlide 17: Case I – Propositions I and IISlide 18: Case I – EquationsSlide 19: Figure 16.3Slide 20: Example – Case IM&M Proposition I – without corporate taxes and bankruptcycosts, the firm cannot affect its value by altering its capitalstructure.B.The Cost of Equity and Financial Leverage: M&M Proposition II Slide 21: The CAPM, the SML and Proposition IIM&M Proposition II –a firm’s cost of equity capital is a positivelinear function of its capital structure (still assuming no taxes):WACC = R A = (E/V)R E + (D/V)R D;R E = R A + (R A– R D)(D/E)As more debt is used, the return on equity increases, but the changein the proportion of debt versus equity just offsets that increase andthe WACC does not change.Lecture Tip: Many students wonder why we are even consideringa situation in which taxes do not exist. We are trying to determinewhat risk-return trade-off is best for the firm’s stockholders. Oneway to get a good understanding of what is relevant to the capitalstructure decision is to start in a “perfect” world and then relaxassumptions as we go. By relaxing one assumption at a time, wecan get a better idea of the impact on the capital structuredecision. This is the classic process of “model building” ineconomics—start simple and add complexity one step at a time.Lecture Tip:According to Proposition II,R E = R A + (R A− R D)(D/E). An alternative explanation is asfollows: In the absence of debt, the required return on equityequals the return on the firm’s assets, R A. As we add debt, weincrease the variability of cash flows available to stockholders,thereby increasing stockholder risk.C.Business and Financial RiskSlide 22: Business Risk and Financial RiskYou may wish to skip over the distinction between the asset betaand the equity beta. The key point is that Proposition II shows thatreturn on equity depends on both business risk and financial risk.Business risk – the risk i nherent in a firm’s operations. I t dependson the systematic risk of the firm’s assets and it determines the firstcomponent of the required return on equity, R A.Financial risk – the extra risk to stockholders that results from debtfinancing. It determines the second component of the requiredreturn on equity, (R A− R D)(D/E).Lecture Tip: Some students may be confused by the concepts offinancial risk and default risk. Proposition II suggests that even ifa firm could issue risk-free debt, its financial risk would exceedzero. Point out that the focus here is on the risk (and requiredreturn) to the shareholder. Regardless of the certainty associatedwith the promised returns to bondholders (default risk), higherlevels of debt imply greater volatility of earnings to stockholders.16.4.M&M Propositions I and II with Corporate TaxesSlide 23: Case II – Cash FlowSlide 24: Example: Case IIA.The Interest Tax ShieldSlide 25: Interest Tax ShieldTax savings arise from the deductibility of interest. It is the keybenefit from borrowing over issuing equity.All else equal, a lower tax rate reduces the value of the tax shield.Thus, the recent Tax Cuts and Jobs Act, which reduced corporatetax rates, may induce firms to reduce the amount of debt in theirstructure.Taxes and M&M Proposition ISlide 26: Case II – Proposition ISlide 27: Example: Case II – Proposition ISlide 28: Figure 16.4Annual interest tax savings = D(R D)(T C)If we assume perpetual debt, then the present value of the interesttax savings = D(R D)(T C) ⁄ R D = DT CWe also assume perpetual cash flows to the firm. This is done forsimplicity, but the ultimate result is the same even if you use cashflows that change through time.Value of an unlevered firm, V U = EBIT(1 − T C)/R U, where R U isthe cost of capital for an all equity firm.Value of a levered firm, V L = V U + DT CSlide 29: Case II – Proposition IISlide 30: Example: Case II – Proposition IILecture Tip:This is a good point at which to digress a bit on theidea that financing decisions can generate positive NPVs. Putsimply, a positive NPV decision is one for which the firm obtainssomething for less than market value. Just as the relativeinefficiency of the physical asset markets makes the search forpositive NPV projects worthwhile, the efficiency of the financialmarkets makes positive NPV financing projects unlikely. This canchange in the presence of market imperfections. Differential taxtreatment between interest and dividends is a big marketimperfection. Further discussion of the successes and failures offinancial engineering may serve to illustrate the core concepts: (1)firm value comes largely from the asset side of the balance sheetand (2) positive NPV financing projects can also be created, but ingeneral, financing is a zero-NPV proposition.B.ConclusionSlide 31: Figure 16.5As a firm increases its debt-equity ratio, WACC declines.16.5.Bankruptcy CostsSlide 32: Case IIIReal-World Tip: In 1997, the remaining assets of FruehaufCorporation, described by Barrons as “the once-dominant”manufacturer of truck trailers, were sold off for a mere $50million, bringing an end to the story of a great firm laid low byover-reliance on debt financing.Founded in the 1940’s, the firm controlled one-third of the trailermarket in the early 1980’s, but then went private in a leveragedbuyout in 1986 to avoid a hostile takeover bid. Saddled with debt itfound difficult to service, the firm went through a number ofrestructurings until the firm filed for chapter 11 in 1996. At thattime its shares were delisted from the NYSE. And, as Barronsnotes, “… the shareholders had been wiped out, leaving thecarcass to be picked over by those with secure claims toFruehauf’s assets … [b]lood was in the water.” By 1997, the lastdivision was sold and the remaining assets were sold to WabashNational.A.Direct Bankruptcy CostsSlide 33: Bankruptcy CostsThe key disadvantage of the use of debt is bankruptcy costs.Direct bankruptcy costs are the legal and administrative expensesdirectly associated with bankruptcy. Generally, these costs arequantifiable and measurable.B.Indirect Bankruptcy CostsSlide 34: More Bankruptcy CostsIndirect bankruptcy costs (e.g., difficulties in hiring and retaininggood people because the firm is in financial difficulty) are hard tomeasure and generally take the form of forgone revenues,opportunity costs, etc.Financial distress costs – the direct and indirect costs of avoidingbankruptcy.16.6.Optimal Capital StructureA.The Static Theory of Capital StructureSlide 35: Figure 16.6-Firms borrow because tax shields are valuable-Borrowing is constrained by the costs of financial distress-The optimal capital structure balances the incremental benefitsand costs of borrowingB.Optimal Capital Structure and the Cost of CapitalSlide 36: Figure 16.6The optimal capital structure is the debt-equity mix that minimizesthe WACC.C.Optimal Capital Structure: A RecapSlide 37: ConclusionsSlide 38: Figure 16.8Case I – No taxes or bankruptcy costs; firm value is unaffected bythe choice of capital structureCase II – Corporate taxes, no bankruptcy costs; firm value ismaximized when the firm uses as much debt as possible due to theinterest tax shieldCase III – Corporate taxes and bankruptcy costs; firm value ismaximized where the additional benefit from the interest tax shieldis just offset by the increase in expected bankruptcy costs—there isan optimal capital structureD.Capital Structure: Some Managerial RecommendationsSlide 39: Managerial RecommendationsTaxes – tax shields are more important for firms with highmarginal tax rates. While firms all face the same 21 percent federaltax rate beginning in 2018, other taxes (such as state taxes) createdifferent effective tax rates. The higher the effective tax rate, thegreater the incentive to borrow.Financial distress – the lower the risk (or cost) of distress, the morelikely a firm is to borrow fundsInternational Note: In theory, the static model of capital structuredescribed in this section applies to multinational firms as well asto domestic firms. The multinational firm should seek to minimizeits global cost of capital by balancing the debt-related tax shieldsacross all of the countries in which the firm does business againstglobal agency and bankruptcy costs. However, this assumes thatworldwide capital markets are well-integrated and that foreignexchange markets are highly efficient. In such an environment,financial managers would seek the optimal global capitalstructure. In practice, of course, the existence of capital marketsegmentation, differential taxes, and regulatory frictions make thedetermination of the global optimum much more difficult than thetheory would suggest.16.7.The Pie AgainA.The Extended Pie ModelSlide 40: Figure 16.9Cash Flow = Payments to stockholders (E) + Payments to creditors(D) + Payments to the government (G) + Payments to bankruptcycourts and lawyers (B) + Payments to all other claimantsB.Marketed Claims versus Nonmarketed ClaimsSlide 41: The Value of the FirmMarketed claims – claims against cash flow that can be bought andsold (bonds, stock)Nonmarketed claims – claims against cash flow that cannot bebought and sold (taxes)V M = value of marketed claimsV N = value of nonmarketed claimsV T = value of all claims = V M + V N= E + D + G + B + …Given the firm’s cash flows, the optimal capital structure is the onethat maximizes V M or minimizes V N.16.8.The Pecking-Order TheorySlide 42: The Pecking-Order TheoryAsymmetric information between buyers and sellers means thatexisting firm owners know more than potential investors. The viewis that existing owners will sell equity when it is overvalued, whichis a negative signal to investors. Thus, this is avoided at all costs,particularly since equity issuance is also costly.A.Internal Financing and the Pecking OrderRules of the pecking order:#1: Use internal financing first#2: Issue debt next#3: New equity lastB.Implications of the Pecking OrderThe pecking-order theory is in contrast to the tradeoff theory inthat:-there is no target D/E ratio.-profitable firms will use less debt.-companies like financial slack.16.9.Observed Capital StructuresSlide 43: Observed Capital StructureSlide 44: Work the Web ExampleTable 16.7 lists ratios of debt to total capital for several U.S. industries.16.10.A Quick Look at the Bankruptcy ProcessSlide 45: Bankruptcy Process – Part IFinancial distress:•Business failure – business terminates with a loss to creditors•Legal bankruptcy – bankruptcy is a legal proceeding for liquidating or reorganizing•Technical insolvency – when a firm defaults on a legal obligation•Accounting insolvency – when total book liabilities exceed total book assets•Bankruptcy – the transfer of some, or all, of the firm’s assets tocreditorsA.Liquidation and ReorganizationSlide 46: Bankruptcy Process – Part IILiquidation – termination of the business, selling off all assetsReorganization – keeping the business going, often issuing newsecurities to replace oldBankruptcy liquidation (Chapter 7 or straight liquidation) – assetsare sold and distributed to creditors in the order of the absolutepriority ruleBankruptcy reorganization (Chapter 11) – involves a legalproceeding in which the company restructures its debt obligations.A plan is filed with the court and the various stakeholders have toagree on the plan.Lecture Tip: It has been said that Carl Icahn’s takeover of TWA inthe early 1980s represents the quintessential example o f the “80stwo-step”—borrow extensively to take the firm private, then file forbankruptcy. Icahn, one of the most noted takeover artists of theperiod, was not as successful at running TWA as he had been withsome of his other businesses. Following repeated losses, he soldthe firm to the employees, who struggled mightily to put the firmback on its feet. Nonetheless, TWA filed for bankruptcyreorganization in 1992 and again in 1995. In each case, a portionof firm ownership was transferred from the owners to the creditorsin return for the latter’s willingness to eliminate a portion of theoutstanding debt.B.Financial Management and the Bankruptcy ProcessThe right to go bankrupt is valuable because it stops creditors fromfurther draining assets from the firm and may be used to improvethe firm’s strategic position vis-à-vis its competitors.C.Agreements to Avoid BankruptcyVoluntary arrangements to restructure debt are often made. Anextension postpones the date of payment, while compositioninvolves a reduced payment.16.11.Summary and ConclusionsSlide 47: Quick QuizSlide 48: Ethics IssuesSlide 49: Comprehensive ProblemSlide 50: End of Chapter。
- 1、下载文档前请自行甄别文档内容的完整性，平台不提供额外的编辑、内容补充、找答案等附加服务。
- 2、"仅部分预览"的文档,不可在线预览部分如存在完整性等问题,可反馈申请退款(可完整预览的文档不适用该条件!)。
- 3、如文档侵犯您的权益，请联系客服反馈,我们会尽快为您处理(人工客服工作时间：9:00-18:30)。
Appendix 19ADETERMINING THE TARGET CASH BALANCESLIDES19A.1Chapter 19 Appendix19A.2Costs of Holding Cash19A.3The BAT Model – I19A.4The BAT Model – II19A.5The BAT Model – III19A.6The BAT Model – IV19A.7The Miller-Orr Model19A.8The Miller-Orr Model: Math19A.9Implications of the Miller-Orr Model19A.10I mplications of the Miller-Orr Model (ctd.)19A.11O ther Factors Influencing the Target Cash Balance19A.12E nd of ChapterAPPENDIX ORGANIZATION19A.1 The Basic Idea19A.2 The BAT Model19A.3 The Miller-Orr Model: A More General Approach19A.4 Implications of the BAT and Miller-Orr Models19A.5 Other Factors Influencing the Target Cash BalanceANNOTATED APPENDIX OUTLINESlide 1: Chapter 19 AppendixTarget cash balance – the desired cash balance as determined bythe trade-off between carrying costs and storage costsAdjustment costs – costs associated with holding low levels ofcash; shortage costsWith a flexible working capital policy, the trade-off is between theopportunity cost of cash balances and the adjustment costs ofbuying, selling, and managing securities.19A.1The Basic IdeaSlide 2: Costs of Holding CashThere is an optimal cash level that minimizes the total costs ofholding cash.19A.2The BAT (Baumol-Allais-Tobin) ModelSlide 3: The BAT Model – ISlide 4: The BAT Model – IISlide 5: The BAT Model – IISlide 6: The BAT Model – IVDefine:C = optimal cash transfer amount (amount of marketable securities tosell to raise cash)F = fixed cost of selling securitiesT = cash needed for transactions over entire planning periodR = opportunity cost of cash (interest rate on marketable securities)Assume that cash is paid out at a constant rate through time.Opportunity cost = Average cash balance × Interest rate= (C ⁄ 2) × RT rading cost = # of transactions × Cost per transfer = (T ⁄ C) × FTotal cost = Oppor tunity cost + Trading cost = (C ⁄ 2)R + (T ⁄ C)FTo find the optimal transfer amount, take a first derivative of the costfunction relative to C and set it equal to zero. You can also find it bysetting opportunity cost = trading cost and solving for C.Method 1: Method 2: Example: Hermes Co. has cash outflows of $500 per day, the interest rate is 10% and the fixed transfer cost is $25. T = 365 × 500 = 182,500 F = 25 R = .119A.3The Miller-Orr Model: A More General ApproachSlide 7: The Miller-Orr ModelThe Miller-Orr model offers a general approach to handling uncertaincash flows.The basic idea:U * = upper limit on cash balanceL = lower limit on cash balanceC * = target cash balanceR FT C R FT C C FT R C FT R C TC 22202222====-+=∂∂R FT C R TF C F C T R C 2222===49.552,9$1.)500,182)(25(2==C CWhen cash reaches U*, the firm transfers cash (buys securities) in theamount of U*− C*. If cash falls below L, the firm sells C*− L worth ofsecurities to add to cash.Slide 8: The Miller-Orr Model: MathUsing the model:Given the variance (σ2) of cash flow (“cash flow” refers to both theamounts that go into and come out of the cash balance) per period, theinterest rate per period (period may be a day, week, or month as longas the two are consistent), and L, the target balance and upper limit,are given by:C* = L + ( ¾ × F ×σ2⁄ R)1/3U* = 3C*− 2LExample: Suppose F = $25, R = 1% per month, and the variance ofmonthly cash flows is $25,000,000 per month. Assume a minimumcash balance of $10,000.C* = 10,000 + ( ¾ (25)(25,000,000)/.01)1/3 = $13,605.62U* = 3(13,605.62) – 2(10,000) = $20,816.8619A.4Implications of the BAT and Miller-Orr ModelsSlide 9: Implications of the Miller-Orr ModelSlide 10: Implications of the Miller-Orr Model (ctd.)From both:-The higher the interest rate (opportunity cost), the lower the targetbalance.-The higher the transaction cost, the higher the target balance.From Miller-Orr:-The greater the variability of cash flows, the higher the target balance 19A.5Other Factors Influencing the Target Cash BalanceSlide 11: Other Factors Influencing the Target Cash Balance-Flexible versus restrictive short-term financing policy-Compensating balance requirements-The number and complexity of checking accountsSlide 12: End of Chapter。