预算编制-第十七章 杠杆企业的估价与资本预算 精品
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Prospectus
• Recall that there are three questions in corporate finance.
• The first regards what long-term investments the firm should make (the capital budgeting question).
• The net present value of the project under leverage is:
APV NPV NPVF
APV $56.50 4 $19.20
t1 (1.08)t
APV $56.50 63.59 $7.09
• So, Pearson should accept the project with debt.
Step One: Levered Cash Flows for Pearson
• Since the firm is using $600 of debt, the equity holders only have to come up with $400 of the initial $1,000.
• The second regards the use of debt (the capital structure question).
• This chapter is the nexus of these questions.
Chapter Outline
17.1 Adjusted Present Value Approach 17.2 Flows to Equity Approach 17.3 Weighted Average Cost of Capital Method 17.4 A Comparison of the APV, FTE, and WACC
Approaches 17.5 Capital Budgeting When the Discount Rate Must
Be Estimated 17.6 APV Example 17.7 Beta and Leverage 17.8 Summary and Conclusions
17.1 Adjusted Present Value Approach
APV NPV NPVF
• The value of a project to the firm can be thought of as the value of the project to an unlevered firm (NPV) plus the present value of the financing side effects (NPVF):
• There are three steps in the FTE Approach:
– Step One: Calculate the levered cash flows – Step Two: Calculate rS. – Step Three: Valuation of the levered cash flows at rS.
• There are four side effects of financing:
– The Tax Subsidy to Debt – The Costs of Issuing New Securities – The Costs of Financial Distress – Subsidies to Debt Financing
APV Example (continued)
• Now, imagine that the firm finances the project with $600 of debt at rB = 8%.
• Pearson’s tax rate is 40%, so they have an interest tax shield worth TCBrB = .40×$600×.08 = $19.20 each year.
NPV of the loan:
NPVloan
$600
4 t 1
$600
.08 (1 .4) (1.08)t
$600 (1.08)4
NPVloan $63.59
APV NPV NPVF
APV $56.50 63.59 $7.09
• Which is the same answer as before.
$250
$375
$500
0
1
2
3
4
The unlevered cost of equity is r0 = 10%:
NPV10%
$1,000
$125 (1.10)
$250 (1.10)2
$375 (1.10)3
$500 (1.10)4
NPV10% $56.50
The project would be rejected by an all-equity firm: NPV < 0.
17.2 Flows to Equity Approach
• Discount the cash flow from the project to the equity holders of the levered firm at the cost of levered equity capital, rS.
APV Example (continued)
• Note that there are two ways to calculate the NPV
of the loan. Previouthe
interest tax shields. Now, let’s calculate the actual
APV Example
Consider a project of the Pearson Company, the timing and size of the incremental after-tax cash flows for an allequity firm are:
-$1,000 $125
• Recall that there are three questions in corporate finance.
• The first regards what long-term investments the firm should make (the capital budgeting question).
• The net present value of the project under leverage is:
APV NPV NPVF
APV $56.50 4 $19.20
t1 (1.08)t
APV $56.50 63.59 $7.09
• So, Pearson should accept the project with debt.
Step One: Levered Cash Flows for Pearson
• Since the firm is using $600 of debt, the equity holders only have to come up with $400 of the initial $1,000.
• The second regards the use of debt (the capital structure question).
• This chapter is the nexus of these questions.
Chapter Outline
17.1 Adjusted Present Value Approach 17.2 Flows to Equity Approach 17.3 Weighted Average Cost of Capital Method 17.4 A Comparison of the APV, FTE, and WACC
Approaches 17.5 Capital Budgeting When the Discount Rate Must
Be Estimated 17.6 APV Example 17.7 Beta and Leverage 17.8 Summary and Conclusions
17.1 Adjusted Present Value Approach
APV NPV NPVF
• The value of a project to the firm can be thought of as the value of the project to an unlevered firm (NPV) plus the present value of the financing side effects (NPVF):
• There are three steps in the FTE Approach:
– Step One: Calculate the levered cash flows – Step Two: Calculate rS. – Step Three: Valuation of the levered cash flows at rS.
• There are four side effects of financing:
– The Tax Subsidy to Debt – The Costs of Issuing New Securities – The Costs of Financial Distress – Subsidies to Debt Financing
APV Example (continued)
• Now, imagine that the firm finances the project with $600 of debt at rB = 8%.
• Pearson’s tax rate is 40%, so they have an interest tax shield worth TCBrB = .40×$600×.08 = $19.20 each year.
NPV of the loan:
NPVloan
$600
4 t 1
$600
.08 (1 .4) (1.08)t
$600 (1.08)4
NPVloan $63.59
APV NPV NPVF
APV $56.50 63.59 $7.09
• Which is the same answer as before.
$250
$375
$500
0
1
2
3
4
The unlevered cost of equity is r0 = 10%:
NPV10%
$1,000
$125 (1.10)
$250 (1.10)2
$375 (1.10)3
$500 (1.10)4
NPV10% $56.50
The project would be rejected by an all-equity firm: NPV < 0.
17.2 Flows to Equity Approach
• Discount the cash flow from the project to the equity holders of the levered firm at the cost of levered equity capital, rS.
APV Example (continued)
• Note that there are two ways to calculate the NPV
of the loan. Previouthe
interest tax shields. Now, let’s calculate the actual
APV Example
Consider a project of the Pearson Company, the timing and size of the incremental after-tax cash flows for an allequity firm are:
-$1,000 $125