预算编制-第十七章-杠杆企业的估价与资本预算课件.ppt

1、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 second regards the use of debt(the capital structure question).This chapter is the nexus of these questions.Chapter Outline17.1

2、Adjusted Present Value Approach17.2 Flows to Equity Approach17.3 Weighted Average Cost of Capital Method17.4 A Comparison of the APV,FTE,and WACC Approaches17.5 Capital Budgeting When the Discount Rate Must Be Estimated17.6 APV Example17.7 Beta and Leverage17.8 Summary and Conclusions17.1 Adjusted P

3、resent Value Approach 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 four side effects of financing:The Tax Subsidy to Debt The Costs of Issuing New Securities The Costs of

4、 Financial Distress Subsidies to Debt FinancingNPVFNPVAPVAPV ExampleConsider a project of the Pearson Company,the timing and size of the incremental after-tax cash flows for an all-equity firm are:01 2 3 4 -$1,000$125$250$375$50050.56$)10.1(500$)10.1(375$)10.1(250$)10.1(125$000,1$%10432%10NPVNPVThe

5、unlevered cost of equity is r0=10%:The project would be rejected by an all-equity firm:NPV 0.APV Example(continued)Now,imagine that the firm finances the project with$600 of debt at rB=8%.Pearsons tax rate is 40%,so they have an interest tax shield worth TCBrB=.40$600.08=$19.20 each year.NPVFNPVAPVT

6、he net present value of the project under leverage is:41)08.1(20.19$50.56$ttAPV09.7$59.6350.56$APVSo,Pearson should accept the project with debt.APV Example(continued)Note that there are two ways to calculate the NPV of the loan.Previously,we calculated the PV of the interest tax shields.Now,lets ca

7、lculate the actual NPV of the loan:NPVFNPVAPV09.7$59.6350.56$APVWhich is the same answer as before.59.63$)08.1(600$)08.1()4.1(08.600$600$441loanttloanNPVNPV17.2 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 ca

8、pital,rS.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.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

9、initial$1,000.Thus,CF0=-$400 Each period,the equity holders must pay interest expense.The after-tax cost of the interest is BrB(1-TC)=$600.08(1-.40)=$28.80 01 2 3 4-$400$221.20CF2=$250-28.80$346.20CF3=$375-28.80-$128.80 CF4=$500-28.80-600CF1=$125-28.80$96.20Step Two:Calculate rS for Pearson To calcu

10、late the debt to equity ratio,B/S,start with the debt to value ratio.Note that the value of the project is)(1(00BCSrrTSBrr41432)08.1(20.19)10.1(500$)10.1(375$)10.1(250$)10.1(125$ttPVB=$600 when V=$1,007.09 so S=$407.09.%77.11)08.10)(.40.1(09.407$600$10.Sr09.007,1$59.6350.943$PVStep Three:Valuation f

11、or Pearson Discount the cash flows to equity holders at rS=11.77%01 2 3 4 -$400$96.20$221.20$346.20 -$128.80 56.28$)1177.1(80.128$)1177.1(20.346$)1177.1(20.221$)1177.1(20.96$400$432PVPV17.3 WACC Method for Pearson To find the value of the project,discount the unlevered cash flows at the weighted ave

12、rage cost of capital.Suppose Pearson Inc.target debt to equity ratio is 1.50)1(CBSWACCTrBSBrBSSr%58.7)40.1(%)8()60.0(%)77.11()40.0(WACCWACCrrSB50.1BS 5.160.05.25.15.15.1SSSBSB40.060.01 BSSValuation for Pearson using WACC To find the value of the project,discount the unlevered cash flows at the weigh

13、ted average cost of capital432)0758.1(500$)0758.1(375$)0758.1(250$)0758.1(125$000,1$NPV68.6$%88.6NPV17.4 A Comparison of the APV,FTE,and WACC Approaches All three approaches attempt the same task:valuation in the presence of debt financing.Guidelines:Use WACC or FTE if the firms target debt-to-value

14、 ratio applies to the project over the life of the project.Use the APV if the projects level of debt is known over the life of the project.In the real world,the WACC is the most widely used by far.Summary:APV,FTE,and WACCAPVWACCFTEInitial Investment AllAllEquity PortionCash FlowsUCFUCFLCFDiscount Ra

15、tes r0 rWACCrSPV of financing effects YesNoNoWhich approach is best?Use APV when the level of debt is constantUse WACC and FTE when the debt ratio is constant17.5 Capital Budgeting When the Discount Rate Must Be Estimated A scale-enhancing project is one where the project is similar to those of the

16、existing firm.In the real world,executives would make the assumption that the business risk of the non-scale-enhancing project would be about equal to the business risk of firms already in the business.No exact formula exists for this.Some executives might select a discount rate slightly higher on t

17、he assumption that the new project is somewhat riskier since it is a new entrant.17.6 APV Example:Worldwide Trousers,Inc.is considering a$5 million expansion of their existing business.The initial expense will be depreciated straight-line over 5 years to zero salvage value;the pretax salvage value i

18、n year 5 will be$500,000.The project will generate pretax earnings of$1,500,000 per year,and not change the risk level of the firm.The firm can obtain a 5-year$3,000,000 loan at 12.5%to partially finance the project.If the project were financed with all equity,the cost of capital would be 18%.The co

19、rporate tax rate is 34%,and the risk-free rate is 4%.The project will require a$100,000 investment in net working capital.Calculate the APV.17.6 APV Example:Costshieldtax interestshieldtax ondepreciatiPVPVPVCostAPVprojectunlevered25.561.873,4$)1()34.1(000,500)1(000,1001.5$505rrmCostfThe cost of the

20、project is not$5,000,000.We must include the round trip in and out of net working capital and the after-tax salvage value.Lets work our way through the four terms in this equation:NWC is riskless,so we discount it at rf.Salvage value should have the same risk as the rest of the firms assets,so we us

21、e r0.17.6 APV Example:PV unlevered projectshieldtax interestshieldtax ondepreciati25.561.873,4$PVPVPVAPVprojectunleveredThe PV unlevered project is the present value of the unlevered cash flows discounted at the unlevered cost of capital,18%.Turning our attention to the second term,899,095,3$)18.1()

22、34.1(5.1$)1(5151projectunleveredttttotprojectunleveredPVmrUCFPV17.6 APV Example:PV depreciation tax shieldshieldtax interestshieldtax ondepreciati899,095,3$25.561.873,4$PVPVAPVThe PV depreciation tax shield is the present value of the tax savings due to depreciation discounted at the risk free rate,

23、at rf=4%Turning our attention to the third term,619,513,1$)04.1(34.1$)1(5151shieldtax ondepreciatittttfCmrTDPV17.6 APV Example:PV interest tax shieldshieldtax interest619,513,1$899,095,3$25.561.873,4$PVAPVThe PV interest tax shield is the present value of the tax savings due to interest expense disc

24、ounted at the firms debt rate,at rD=12.5%Turning our attention to the last term,46.972,453)125.1(500,127)125.1(3$125.034.0)1(3$51shieldtax interest5151shieldtax interestttttttDDCPVmrmrTPV17.6 APV Example:Adding it all upSince the project has a positive APV,it looks like a go.Lets add the four terms

25、in this equation:930,189$46.972,453619,513,1899,095,325.561.873,4$APVAPV17.7 Beta and Leverage Recall that an asset beta would be of the form:2MarketAsset),(MarketUCFCov17.7 Beta and Leverage:No Corp.Taxes In a world without corporate taxes,and with riskless corporate debt,it can be shown that the r

26、elationship between the beta of the unlevered firm and the beta of levered equity is:EquityAssetAssetEquityIn a world without corporate taxes,and with risky corporate debt,it can be shown that the relationship between the beta of the unlevered firm and the beta of levered equity is:EquityDebtAssetAs

27、setEquityAssetDebt17.7 Beta and Leverage:with Corp.Taxes In a world with corporate taxes,and riskless debt,it can be shown that the relationship between the beta of the unlevered firm and the beta of levered equity is:firm UnleveredEquity)1(EquityDebt1CTSince must be more than 1 for a levered firm,i

28、t follows thatfirm UnleveredEquity)1(EquityDebt1CT17.7 Beta and Leverage:with Corp.Taxes If the beta of the debt is non-zero,then:LCSBT)(1(Debtfirm Unleveredfirm UnleveredEquity17.8 Summary and Conclusions1.The APV formula can be written as:2.The FTE formula can be written as:3.The WACC formula can

29、be written asinvestmentInitialdebtof effects Additional)1(10tttrUCFAPVborrowedAmountinvestmentInitial)1(1ttStrLCFAPVinvestmentInitial)1(1ttWACCtrUCF17.8 Summary and Conclusions4Use the WACC or FTE if the firms target debt to value ratio applies to the project over its life.5The APV method is used if the level of debt is known over the projects life.6The beta of the equity of the firm is positively related to the leverage of the firm.