บรรยายสรุปcompbm602 feb 1 2010 01

1BM 602

. [email protected]

081-625-2182

BALANCE SHEET

ASSETS

Current Assets

Fixed Assets

LIAB. & EQUITY

Debt

Equity:Com. Stocks

Retained Earnings

BALANCE SHEET

ASSETS

Current Assets

Fixed Assets

LIAB. & EQUITY

Debt (II)

Equity: Com. Stocks (I)

Retained Earnings(III)

BALANCE SHEET

ASSETSCurrent Assets

Fixed Assets

Uses of Funds

LIAB. & EQUITYDebtEquity:

Com. StocksRetained Earnings

Sources of Funds

2BALANCE SHEETInvesting Interest

Equity: ------------------ DividendCom. Stocks (I) &Retained Earnings (III) Capital Gains

Sources of Funds

Managing

BALANCE SHEETFinancing

LIAB. & EQUITYDebt (II) ------------------> Interest

Equity: ------------------ DividendCom. Stocks (I) &Retained Earnings (III) Capital Gains

Sources of Funds : WACC & CAPITAL STRUCTURE

Managing

BALANCE SHEETInvesting

ASSETSCurrent Assets ------- Liquidity & Profitability

Fixed Assets ------ Fixed Assets Turnover------ Payback, DPB------ NPV, IRR, MIRR

Uses of Funds

Managing

3BALANCE SHEETInvesting

ASSETSCurrent Assets ------- Liquidity & Profitability

Fixed Assets ------ Fixed Assets Turnover------ Payback, DPB------ NPV, IRR, MIRR

Uses of Funds: RISK $ RATES OF RETURN

Managing

1 - 1

Responsibility of the Financial Staffoi

Maximize stock value by: ono Forecasting and planning (r) Investment and financing decisions ( )

Coordination and control () Transactions in the financial markets (n) Managing risk ()

1 - 5Financial Management Issues of the New Millennium

n

The effect of changing technology()

The globalization of business(n)

1 - 7

4or +o n

r

ono

n1 - 8

r (Goals of the Corporation) r (Goals of the Corporation)

oo(Stockholder wealth maximization)

oo(Maximizing the price of the firms common stock)

1 - 15

Financial Goals of the Corporationr

The primary financial goal is shareholder wealth maximization,which translates to maximizing stock price.(n oo oo )

1 - 16 Business Ethics

Ethics noor n o o no} on r (Positive Correlation)

1 - 20

5Factors that affect stock price.{no

Projected cash flows to shareholders ( ooo)

Timing of the cash flow stream (no)

Riskiness of the cash flows ()

1 - 31 Basic Valuation Modelno

To estimate an assets value, one estimates the cash flow for each period t (CFt), the life of the asset (n),and the appropriate discount rate (k)nr o n t (CFt), r (n), n (k)

n

1tt

t

nn

22

11

.k)(1

CF

k)(1CF

k)(1CF

k)(1CF

Value /

1 - 32

Factors that Affect the Level and Riskiness of Cash Flows{n

Decisions made by financial managers:(o) Investment decisions () Financing decisions (the relative use of debt financing) (r)

Dividend policy decisions ({) The external environment (o)

1 - 33

1. on2. 3. 4. r

1 - 34

62 - 2 e The Annual Report

Balance sheet

Income statement

Statement of retained earnings n{

Statement of cash flows nnonon

2 - 4

Economic Value Added (EVA)

n(o)

2 - 30

(EVA) = NOPAT After-tax ($) Cost

of Capital

nOperating After - tax %capital cost of capitalNOPAT

2 - 31

n oo (ooo}o)

7MVA =Market value

of equity

Equity capital supplied by investors

MVA = no o n oo

2 - 34 3 - 2

1. rn 1. rn

n

rnrn

}onn n r n

3 - 5

1. }}n2. oon o

3 - 6

8 nno n n no ?

n} 5 n 1. n (Liquidity)2. or (Asset Management)3. (Debt Management)4. (Profitability)5. (Market Value)

3 - 71.1. Liquidity

2.2. Asset Management o

r (amount ofassets vs. sales)

3.3. Debt Management ro

3 - 8

4.4. Profitability njn

n PM, ROE ROA

5.5. Market Value on}n n P/E M/B

3 - 9 2. nn2. nn

n = 4.2

n = 2.1

1. n (Current ratio)

r=

2. n (Quick or Acid test ratio)

r - o=

r = 1,000310 = 3.2

r = 385310 = 1.2

3 - 15

93. nor3. nor

n = 9. 0

1. o (Inventory turnover ratio)

o

=

r = 3,000615

= 4.9

3 - 17

o : oo : o

onnno

on

3 - 18

r = 3753,000 / 365

=375

8.2192 = 46

n = 36

2. (DSO = Days sales outstanding)

on

one/365

==

3 - 19o : DSOo : DSO

r oonnono

3 - 20

10

3. r(Fixed assets turnover ratio)

r

=

r = 3,0001,000= 3.0

n = 3.0

4. r (Total assets turnover ratio) =

r

= 3,0002,000 = 1.5 r

n = 1.8

3 - 21 o : FA TAo : FA TA r n

3. 0 x 3. 0 xFA TOTA TO 1. 5 x 1. 8 x

rnnnrnno o

3 - 22

oo1. oo

no2. oo3. ( - n) }oo

nn

4. n4. n3 - 23

r = 310 + 7542,000

= 1,0642,000

= 53.2 %

n = 40.0 %

2. Time - interest - earned (TIE) = EBITn r 283.8

88= = 3.2 n

n = 6.0 n

1. n(Debt ratio)

r

=3 - 28

11

3. EBITDA Coverage Ratio nn nono

EBITDA coverage ratio EBITDA + Lease paymentsInterest + Loan repayments + Lease payments

=

411.8136

= r 283.8 + 100 + 2888 + 20 + 28= = 3.0 n

n = 4.3 n

3 - 29o : no : n

r nD/ATIEEBITDAcoverage

53.2 %3.2 x3.0 x

40.0 %6.0 x4.3 x

r nn

3 - 30

nnn EBITDA nnonnnooo

3 - 315. n5. n

1. (Profit margin on sales)

n}oo

=

r = 113.53,000

= 3.8 %

n = 5.0 %

3 - 32

12

o : no : n

r nPM 3. 8 % 5. 0 %

PM r nn o on o

3 - 33

2. Basic Earning Power(BEP) EBITr

=

n = 17.2 %

= 14.2 %

r 283.82,000

=

3 - 34

o : BEPo : BEP r n

BEP 14.2 % 17.2 %

BEP nnn r oon r BEP nnoorn

3 - 353. r

[Return on total assets (ROA) Return on Investment (ROI)]

n}oor=

n = 9.0 %

r 113.52,000

= 5.7 %=

4. no}o[(Return on common equity (ROE)]

n}oonoo=

r 113.5896

= = 12.7 %

n = 15.0 %

3 - 36

13

o : ROA ROEo : ROA ROE

ROAROE

5.7 % 9.0 %12.7 % 15.0 %

r n

r ROA ROE nn

BEP nnon

3 - 376. n6. n

1. no [Price/Earnings (P/E) Ratio]

nono

=

r = 23.002.27= 10.1

n = 12.5

3 - 38

2. no (Price/Cash Flow Ratio)

no no=

r = 23.004.27 = 5. 4

n = 6. 8

3 - 393. n

no [Market/Book(M/B) Ratio]

nooon=nno(Book value per share)

Market/book ratio (M/B) nonno=

r 23.0017.92

= = 1.3

n = 1.7

r = 89650

= 17.92

3 - 40

14

o : o :

P/EP/CFM/B

10.1 x 12.5 x5.4 x 6.8 x1.3 x 1.7 x

r n

P/E : 1 oonP/CF : 1 oonM/B : n 1 oon

n 3 no n

3 - 418. oorn8. oorn

1. n no

2. nnnn}o}

3. joono4. oono

3 - 49

5. n (window dressing)6. n n LIFO FIFO7. rn

o ono8. n nn

nonn oo

3 - 5010. o (r{)10. o (r{)

1. on on2. o rn3. o Supplier n4. no5. rn}n6. o7. n

3 - 52

15

4 - 2 (What is a market?) (What is a market?)

A market is a venue where goods and services are exchanged. ( o o)

A financial market is a place where individuals and organizations wanting to borrow funds are brought together with those having a surplus of funds. ( rn ooooo)

4 - 5

Types of Market1. Physical asset markets : (Tangible Real

asset markets) r n on

Financial asset markets : r n o o oo r

1. 1. 4 - 6

2. Spot markets : (on - the - spot) ron

Futures markets : rnn

4 - 7

16

3. Money markets : rn 1 e n

Capital markets : r 1 e n o oo

4 - 8

6. Primary markets () : r

oo

4 - 11

7. Secondary markets () :rnoo

oo oon

4 - 12

.

oo

on -

o

o o

r

(OTC)

( Primary Market )

( Secondary Market )

o

n

n

4 - 13

17

onooonHow is capital transferred between savers and borrowers?

Direct transfers o Investment banking house on

Financial intermediaries on

4 - 162. 2.

Business SaversInvestment

Banking HouseBusiness Savers

FinancialIntermediaryBusiness Savers

Securities (Stocks or Bonds)Dollars

Stocks BondsDollars Dollars

Dollars Dollars

Business,Securities

Intermediary,sSecurities

4 - 17

3. r3. r

Organized Security Exchanges

Over - the - Counter Market : OTC

4 - 20

The price, or cost, of debt capital is the interest rate. (o )

The price, or cost, of equity capital is the required return. The required return investors expect is composed of compensation in the form of dividends and capital gains. (ono oonoo {n)

4. o (The Cost of Money)4. o (The Cost of Money)4 - 22

18

Production opportunities(o) Time preferences for

consumption (noon)

{no{no

Risk (oo) Expected inflation (jn)

4 - 235. 5.

r

kA = 108

0 Dollars

%S1

D1D2

kB = 12

Dollars

D1

S1%Market A : Low - Risk SecuritiesInterest Rate , k

Market B : High - Risk SecuritiesInterest Rate , k

0

4 - 24

k = k* + IP + DRP + LP + MRPk = k* + IP + DRP + LP + MRP

6. r6. r

4 - 25

k = o (represents any nominal rate) n o (required rate of return on a debt security)

k* = r (realrisk - free rate of interest) on j n r

Nominal vs. Real rates Nominal vs. Real rates 4 - 26

19

IP = nj (inflation premium)kRF = k* + IP = r

(rate of interest on treasury securities)DRP = nn

o (default risk premium)LP = nn

(liquidity premium)MRP = n

n (maturity risk premium)

4 - 27kRF = k* + IP

Nominal (Quoted)Risk - Free Rate

of Interest

o- US. Treasury bill (T - bill)- Treasury bonds (T - bonds)

* noo

4 - 28

IP noo }jor

DRP (Default Risk Premium)o DRP

o

4 - 29

LP (Liquidity Premium)n

}o onn nn 2 - 4 - 5 %

4 - 30

20

MRP (Maturity Risk Premium)r

oo n (interest rate risk)

o

4 - 31 5 - 2

1. r (financial assets) : ono

nn

5 - 52. r 2

(1) Stand - alone risk () r

(2) Portfolio risk rr

5 - 6

21

(1) o (diversifiable risk)oo

(2) no (market risk , relevant risk) r onno o

3. nrn} 2 n5 - 7

4. r noo (

) n 5 % (n) noooon 5 % ()

o(averse to risk)

o(averse to risk)

5 - 8

1. 1.

() =

o -

= 1,100 - 1,000 = 100 n 1,000 1 e o 1,100 :

5 - 9

=o -

=1,000=100

10 %

5 - 10

22

Risk, in traditional terms, is viewed as a negative.

Websters dictionary, for instance, defines risk as exposing to danger or hazard. The Chinese symbols for risk, reproduced below, give a much better description of risk

wang chi The first symbol is the symbol for danger,

while the second is the symbol for opportunity, making risk a mix of danger and opportunity.

5 - 11

n}o (low or negative return)on}o

5 - 12

2 (Two types of investment risk) r

(Stand - alone risk ) nr

(Portfolio risk)

5 - 13RISK,RETURN,AND DIVERSIFICATION

RISK ----> UNFAVORABLE OUTCOME

HIGH RISK, HIGH RETURNDONT PUT ALL EGGS IN ONE BASKET

DIVERSIFY RISK(UNSYSTEMATIC RISK)

5 - 14

23

2. (Stand Alone Risk)2. (Stand Alone Risk)

rnoo on

r

r

5 - 15(1) n} (Probability Distribution)(1) n} (Probability Distribution)

n}rr

on}or o n

n}(probability distribution)n}

(probability distribution)

5 - 17

r(Expected Rate of Return)

k =^ P1k1 + P2k2 + .Pnknk^ = 6 P ik i

n

i = 1

(2) no : k (k - hat) (2) no : k (k - hat) ^

Pi = r i , ki = or i

5 - 19

- 70 0 15 100 (%)

0.1

0.20.3

0.4

Martin ProductsMartin Productsn}

no

100 15 20

0.1

0.20.30.4

U.S. WaterU.S. Watern}

(%)

no

5 - 21

24

5 - 22n}

no(Expected Rate of Return)

(%)10015 200 10-70

U

M

Standard deviation )^(1

2

n

iii PkkV

Variance = )^(1

2

n

iii PkkV 2

o n

(3) : n(3) : n5 - 23

VV VVV Vk

68.26%

95.46%99.74%

15%

M

-50.84% 80.84%

k = 15%^= 65.84%

^

V

5 - 27 : :

on (Coefficient of Variation CV)

1. k no n2. no k n3. k n no

n

^^V^

V

V

5 - 28

25

CV = =Std dev V

k^Mean

(4) : Coefficient of Variation(4) : Coefficient of Variation

n no 1 n

A standardized measure of dispersion about the

expected value, that shows the risk per unit

of return.

5 - 29(4) o(4) o

oon }onn }on

onon

5 - 46

Risk premium the difference between the return on a risky asset and less risky asset, which serves as compensation for investors to hold riskier securities.(n nnrrn }ono rn)

on (Investor attitude towards risk)

5 - 47

Portfolio : nr 2

3. nr (Portfolio Risk)3. nr (Portfolio Risk)

r}no

5 - 49

26

5 - 50

(Expected return on a portfolio) = kP^kP = w1k1 + w2k2 + . . . . . . . . . wnknkP = w1k1 + w2k2 + . . . . . . . . . wnkn^^^^

^ ^kp = 6 wi k in

i = 1

(1) nonr(1) nonr

kP = nn ki^ ^

(2) nr : P(2) nr : P

Correlation Coefficient : r

P nnn i rnr

rnnno

V

V

VV

5 - 52

Stand-alone Market Firm-specificrisk risk risk= +

}n stand - alone

risk rnoon b

}nr o

(3) o(3) o5 - 58

DiversifiableCompany - SpecificUnsystematic

Risk

}o}

r n o r

o o5 - 59

27

noon n n portfolio n

RelevantMarketNon - diversifiableSystematic

Risk

nono5 - 60

ono [betab] ooo ooo # Stocks in Portfolio

10 20 30 40 2,000+

Company Specific Risk

Market Risk ()20

0

p (%)

35

ro (n)

V

Stand-Alone Risk pV

VM=

5 - 63

Capital Asset Pricing Model : CAPM

}r

ornn (risk free rate) oo

5 - 65

ki = kRF + (kM - kRF)biki = oo i kRF = nkM = bi = noo i

5 - 66

28

(4) no (Beta : b)(4) no (Beta : b)Beta Coefficient : b

oo rrn

5 - 67

Run a regression of past returns of a security against past returns on the market. (o regression r)

The slope of the regression line (sometimes called the securitys characteristic line) is defined as the beta coefficient for the security. [n regression line (n the securitys characteristic line) n}nor]

5 - 68

.

.

.ki_

kM_

- 5 0 5 10 15 20

20

15

10

5

- 5

-10

Illustration of beta calculation:Regression line:

ki = -2.59 + 1.44 kM^ ^

Year kM ki1 15% 18%2 -5 -103 12 16

5 - 69

EXCESS RETURNON STOCK

EXCESS RETURNON MARKET PORTFOLIO

BetaBeta =RiseRiseRunRun

Narrower spreadNarrower spreadis higher correlationis higher correlation

Characteristic LineCharacteristic Line

CHARACTERISTIC LINE5 - 70

29

An index of systematic risk.It measures the sensitivity of a stocks returns to changes in returns on the market portfolio.The beta of a portfolio is simply a weighted average of the individual stock betas in the portfolio.

An index of systematic risksystematic risk.It measures the sensitivity of a stocks returns to changes in returns on the market portfolio.The betabeta of a portfolio is simply a weighted average of the individual stock betas in the portfolio.

WHAT IS BETA ?5 - 71

EXCESS RETURNON STOCK

EXCESS RETURNON MARKET PORTFOLIO

Beta < 1Beta < 1(defensive)(defensive)

Beta = 1Beta = 1

Beta > 1Beta > 1(aggressive)(aggressive)

Each characteristic characteristic lineline has a

different slope.

CHARACTERISTIC LINES AND DIFFERENT BATAS

5 - 72

Security Market Line (SML)

orn ono

or

4. rn4. rn5 - 85

Security Market Line Equation : SML Security Market Line Equation : SML

ki = kRF + (kM - kRF) biki = kRF + (kM - kRF) bi

oo i

= +

n

noo i

o i

5 - 86

30

Security Market Line ( SML ) Security Market Line ( SML ) 5 - 94

SML 1Original situation

o k (%)

0 1 1.5 Risk , b i

11

6

SML 1Original situation

o k (%)

SML 2

0 1 1.5 Risk , b i

1186

New SMLIP = 2 %

13

5 - 95

kM= 13.5%

kM = 11%SML1

Original situation

SML2

After increasein risk aversion

Risk, bi

13.5

6

1.0

2. 5 %

0

o k (%)

11

5 - 98 6 - 2

31

}rn Show the timing of cash flows. () Tick marks occur at the end of periods, so Time 0 is today; Time 1 is the end

of the first period (year, month, etc.) or the beginning of the second period. ( o 0 { 1 1 (e ) })

CF0 CF1 CF3CF2

0 1 2 3i%

1. o (TIME LINE)1. o (TIME LINE)6 - 6

Finding the FV of a cash flow or series of cash flows when compound interest is applied is called compounding. ( FV oo)

FV can be solved by using the arithmetic, financial calculator, and spreadsheet methods. (FVoo o spreadsheet)

FV = ?

0 1 2 310%

- 100

6 - 102. n (Future Value : FV)2. n (Future Value : FV)

FV1 = PV + PV ( i )= PV (1 + i)

FV2 = FV1 (1 + i)= PV (1 + i) (1 + i)= PV (1 + i)2

FVn = PV (1 + i)nFVn = PV (1 + i)n

n FV5 = 100 (1 + 0.05)5= $ 127.63

6 - 12Future Value Interest Factors : FVIFi , n = (1 + i)n

PERIOD ( n )123456789

10

0 %1.00001.00001.00001.00001.00001.00001.00001.00001.00001.0000

5 %1.05001.10251.15761.2155

1.34011.04711.44751.55131.6289

10 %1.10001.21001.33101.46411.61051.77161.94872.14362.35792.5937

15 %1.15001.32251.52091.74902.01142.31312.66003.05903.51794.0456

6 - 13

1.2763

32

Finding the PV of a cash flow or series of cash flows when compound interest is applied is called discounting (the reverse of compounding). [n PV o o n n (}oo)]

The PV shows the value of cash flows in terms of todays purchasing power. (PVn{)

PV = ? 100

0 1 2 3

10%

6 - 173. n{ (Present Value : PV)3. n{ (Present Value : PV)

0 i = 5% 1 2 3 4 5

FVn = PV (1 + i) nFVn

(1 + i) no :

127. 63PV = ? FV1 FV2 FV3 FV4

PV =

FV5

6 - 18

Present Value Interest Factors for $1: PVIFi , n = 1/( 1 + i )nPERIOD ( n )

123456789

10

8 %.9259.8573.7938.7350.6806.6302.5835.5403.5002.4632

10 %.9091.8264.7513.6830.6209.5645.5132.4665.4241.3855

12 %.8929.7972.7118.6355.5674.5066.4523.4039.3606.3220

14 %.8772.7695.6750.5921.5194.4556.3996.3506.3075.2697

.7835

5 %.9524.9070.8638.8227

.7462

.7107

.6768

.6446

.6139

Annuity = n ()n on n oo

6 - 315. nn(Future Value of an Annuity : FVAn)5. nn(Future Value of an Annuity : FVAn)

33

Future Value of an Annuity (FVAn) nn

Annuity n} 2 1. Ordinary Annuity (Deferred Annuity) :

nn 2. Annuity Due : nn o

6 - 32 What is the difference between an ordinary annuity and an annuity due?

Ordinary Annuity

PMT PMTPMT

0 1 2 3i%

PMT PMT

0 1 2 3i%

PMT

Annuity Due

6 - 33

Future Value Interest Factors for $1 Annuity : FVIFAi , nPERIOD ( n )

123456789

10

8 %1.00002.08003.24644.50615.86667.33598.922810.63712.48814.487

10 %1.00002.10003.31004.64106.10517.71569.487211.43613.57915.937

12 %1.00002.12003.37444.77936.35288.115210.08912.30014.77617.549

14 %1.00002.14003.43964.92116.61018.535510.73013.23316.08519.337

3.1525

5 %1.00002.0500

4.31015.52566.80198.14209.549111.02712.578

1. Ordinary Annuity1. Ordinary Annuity

6. n{n (Present Value of an Annuity : PVA)6. n{n (Present Value of an Annuity : PVA)

PVAn = PMT (PVIFAi , n)PVAn = PMT (PVIFAi , n)

0 5 % 1 2 3100 100 100

PVA3

95. 2490. 7086. 38

272. 32

1. o

6 - 41

34

Present Value Interest Factors for $1 Annuity : PVIFAi , nPERIOD ( n )

123456789

10

5 %0.95241.8594

3.54604.32955.07575.78646.46327.10787.7271

8 %0.92591.78332.57713.31213.99274.62295.20645.74666.24696.7101

10 %0.90911.73552.48693.16993.79084.35534.86845.33495.75906.1446

12 %0.89291.69012.40183.03733.60484.11144.56384.96765.32825.6502

14 %0.87721.64672.32162.91373.43313.88874.28834.63894.94645.2161

2.7232 0 1 2 3 4 5PV = ? 100 100 100 100 100

5 %

7. Perpetuities7. Perpetuities

Perpetuities on n

PV ( Perpetuities ) = PMTi

1000.05 = $ 2,000=

6 - 49

1. n{ (Present Value)1. n{ (Present Value)

8. nnn8. nnn

PV = + +CF1 CF2 CFn(1 + i) (1 + i)2 (1 + i)n

6 - 50

100 200 200 200 200 0 1,0000 1 2 3 4 5 6 76 %

1. o

94.34178.00167.92158.42149.450665.06

1,413.19

6 - 51

35

Will the FV of a lump sum be larger or smaller if compounded more often, holding the stated I% constant?

LARGER, as the more frequently compounding occurs, interest is earned on interest more often.

Annually: FV3 = $100(1.10)3 = $133.10

0 1 2 310%

100 133.10

Semiannually: FV6 = $100(1.05)6 = $134.01

0 1 2 35%

4 5 6

134.01

1 2 30

100

6 - 66

Annual compounding FV = PV (1 + i) n

More frequent compounding FVn = PV mniNom

m

1 +

6 - 79

1. Nominal (Quoted) Rate : iNomAnnual Percentage Rate : APRooooonerr n

12 4.5 % 1 e 3 4.5 % 1 e

6 - 892. Periodic Rate : iPER

iPER = iNomm

oo 3 % n(3) } 12 % ne

iPER = iNomm

; iNom = (iPER) m

= 3 (4) = 12 %

6 - 90

36

3. Effective (Equivalent) Annual Rate : EAR

EAR : EFF % = 1 + iNom m - 1m

6 - 91 7 - 2

(What is a bond ?) A long-term debt instrument in which a borrower

agrees to make payments of principal and interest, on specific dates, to the holders of the bond. oo (o) onnooono

7 - 5

1. on1. on

1. (Treasury bonds Government bonds)

nn o (no default risk)

7 - 6

37

2. (Corporate bonds)n default risk

3. (Municipal bonds) nn o default risk

7 - 74. n (Foreign bonds)

nnn default risk

7 - 8

oono 1 n

1. no (Par value)

7 - 9

2. (Coupon interest rate)Floating rate bonds

Fixed rate bonds

on Zero coupon bonds nn

ono

7 - 10

38

3. n (Maturity date) nn 10 - 40 e

4. nn (Call provisions) non oonn

7 - 11

5. n (Sinking funds) oono

6. (Convertible bonds) oo}oo

7 - 12

7. o (Bonds issued with warrants) o

oooo

7 - 13

8. o (Income bond) non

9. Indexd bond (Purchasing power bond) j

7 - 14

39

3. n (Bond Valuation)3. n (Bond Valuation)0 1 2 3 N

INT +MINTINTINTVB = ?

VB = nkd = o

( )

kd%

7 - 15

N = {n

INT = nM = nonn

(par value)

7 - 16

VB = INT (PVIFAk , N) + M (PVIFk , N)VB = INT (PVIFAk , N) + M (PVIFk , N)

VB = N INT + Mt = 1 (1 + kd) t (1 + kd) N

d d

7 - 17 n 1,000 10 % 15 e o 10 %nn

VB = + ++ +INT( 1 + kd )1INT

( 1 + kd )2INT

( 1 + kd )NM

( 1 + kd )N

VB = + +.+ +100( 1 + 0.1 )1100

( 1 + 0.1 )2100

( 1 + 0.1 )151,000

( 1 + 0.1 )15= 100 (PVIFA10% , 15) + 1,000 (PVIF10% , 15)

7 - 18

40

nn

M = 1,0001,495

714

Bond Value

Years

M

Premium Bond

Discount Bond

0 5 10 15

kd = coupon rate

kd 5 %

kd } 15 %

7 - 27

ooo

4. 4. 7 - 29

no (par value) 1,000 10 % 14 e

1,494.93 o

(YTM) en

7 - 30

VB = INT (PVIFA kd , 14) + M (PVIF kd , 14)VB = INT (PVIFA kd , 14) + M (PVIF kd , 14)

1. o

VB = N INT + Mt = 1 (1 + kd) t (1 + kd) N

1,494.93 = + + + +100(1 + kd)100

(1 + kd)2100

(1 + kd)14 1,000

(1 + kd)14

7 - 31

41

o n

n

7 - 34

VB = N 100 + Call Pricet = 1 (1 + kd) t (1 + kd) N

1,494.93 = N 100 + 1,100t = 1 (1 + kd) t (1 + kd) N

1. o7 - 36

{

o{

ne 100 { 985

985Current Yield = = 10.15 %100

=

7 - 386.6.

(Interest Rate Risk)

(Interest Rate Risk)

n

n

1. rn(PRICE)

1. ro(INCOME)o

2. ono

2. ono

(Reinvestment Rate Risk)

7 - 42

42

AAA AA A BBB

oInvestment Grade

oInvestment Grade

(Junk Bond)

(Junk Bond)

BB B CCC D

Ba B Caa CAaa Aa A Baa

S&P :

Moody ,s :

7 - 45 8 - 2

(Common Stock Valuation)3. no 3. no

o : oo}o 2

1. n{ooo2. ooooon n n (capital gain) oon n capital loss

8 - 7

Dt = { noe tP0 = o {P^t = o oe tP^0 = o }

D0 = { e{

8 - 8

43

g = {o^P0 = P0 orn

kS = o

kS = okS = no ^

^( non kS kS)

8 - 9

D1 = {noe (expected dividend yield)

P1 - P0 = nooe (expected capital gains yield)

P0^P0

8 - 10

non 2 n

(1) no{ (2) noo

Expected total return : kS = +D1 P1 - P0P0 P0

^ ^

8 - 11oo 20

(P0) no{ (D1) o 1.50 oo 1 e no (P1) 20.20 nonn

kS = +D1 P1 - P0P0 P0

^ ^ = +1.50 20.20 - 2020 20= 8. 5 %

8 - 12

^

44

noo{}rnoo{}r

oooo ro {

n o

n{{

o

8 - 13

P0 = + + ... + ^ D1 D2 D(1 + kS)1 (1 + kS)2 (1 + kS)

P^0 = Dtt = 1 (1 + kS)t6v

vv

8 - 14

4. no{

4. no{

P^0 =D0(1 + g)kS - g

P^0 =D1

kS - g

8 - 15

oo

normalGrowth , 8 %

normalGrowth , 8 %

zeroGrowth , 0 %

DecliningGrowth , - 8 %

Dividend

1.15

0 1 2 3 4 5 Years

End of SupernormalGrowth Period Supernormal

Growth , 30 %

{ 8 - 21

45

9 - 2 n

on o o

1. oo}n(discount rate)

2. onn

9 - 6

1. oo1. oo

nn onn ooonnn nonon

9 - 7

2. 2.

r (Capital Components) : oonn

n component cost

9 - 8

46

kd = n (on)

kd (1 - T) = okP = ookS = ono}o 2 n

n n n on

ro9 - 9

WACC = on (Weighted Average Cost of Capital)

o WACC n (o)

9 - 10

3. o : kd(1 - T)3. o : kd(1 - T)

o = - oo = - o

= kd(1 - T)= kd(1 - T)

= kd - kdT

9 - 11

4. oo : kP4. oo : kP

DPPPkP =

9 - 13

47

5. o : kS5. o : kSooo 2 n

1. 2. on on ononn

9 - 15

}o (opportunity cost)oo ooo{nno oo = ooo = kS

9 - 16

oo

3 1. o Capital Asset Pricing Model : CAPM

kS = kRF + ( kM - kRF ) bikS = kRF + ( kM - kRF ) bi

9 - 17 2. Risk Premium

n (bond yield) 8 % risk premium 4 %

kS = 8 % + 4 % = 12 % n bond yield 12 % : kS = 12 + 4 = 16 %

kS = Bond Yield + Risk PremiumkS = Bond Yield + Risk Premium

9 - 19

48

3. Dividend Yield Growth Rate Discounted Cash Flow

P0 = D1

kS - gD1kS = + g P0

^

9 - 20

3 kS nn 1 = 11.5 % 2 = 12.0 % 3 = 13.4 %

onoo conservative o 13.4 %oo 3

9 - 24

6. oon : ke6. oon : keke n kS onn

ononoD1

P0 (1 - F)F = nono

P0 (1 - F) =

ke = + g

9 - 257. on

(Weighted Average Cost of Capital : WACC)7. on

(Weighted Average Cost of Capital : WACC)

WACC = wdkd(1 - T) + wPkP + wckSw = nn

9 - 28

49

8. {no8. {no

{no

{no

{o{o

oo{{

9 - 309. oo

(Adjusting the Cost of Capital for Risk)9. oo

(Adjusting the Cost of Capital for Risk)

9 - 31

no

ooo

10 - 2

2. o2. o

norn rooo

10 - 9

50

3. 3. 1. nn2. nno3. r4. rn5. o6.

10 - 11

5. 5. 5.1 (Payback Period : PB)5.2 n{

(Discounted Payback Period : DPB)5.3 n{ (Net Present Value : NPV)

10 - 13

5.4 (Internal Rate of Return : IRR)

5.5 n (Modified Internal Rate of Return : MIRR)

10 - 145.3 n{ ( NPV )5.3 n{ ( NPV )

n{nNPV = PV - PV n

= CF1 CF2 CFnCF0 + + + +( 1 + k )1 ( 1 + k )2 ( 1 + k )n= CFt

nt = 0 ( 1 + k )n

10 - 27

51

CF0 = CFt = e t

k = o

10 - 28

5.4 ( IRR )5.4 ( IRR )

n ( discount rate ) on{n ( n NPV n 0)

10 - 34

CF0 = + + +( 1 + IRR )1 ( 1 + IRR )2 ( 1 + IRR )nCF1 CF2 CFn

( 1 + IRR )1 ( 1 + IRR )2 ( 1 + IRR )3 ( 1 + IRR )41,000 = + + +500 400 300 100

10 - 35

0 1 2 3 4

- 1,000 500 400 300 1001,000

CF

NPV

PV

0

CF1-4

IRR

IRR S = 14.5 %

10 - 36

52

r

1. IRR no

2. o IRR = o onoo

10 - 38

4. o IRR > oo IRR < o

5. }o o IRR n

3. o IRR > o ono

S L : S

10 - 39

n IRR no NPV MIRR }r IRR

10 - 53n 1.6 o e 1 10 o e 2 on 10 o o 10 %

0 1 2- 1010- 1.6

CFj CFj CFj i EXE

= - 0.7736 o

- 1010- 1.6NPV

10

10 - 54

53

100 200 300 400 500

IRR1 = 25 %

Cost of Capital ( % )

NPV( Millions of Baths )

- 1.5- 1.0

0- 0.5

0.51.01.5

IRR2 = 400 %

NPV = - 1.5 + -10 10( 1 + k ) ( 1 + k )2

NPV = 0 IRR = 25% 400%

10 - 55

7. n7. n

1. noe eoono (Cost of Capital)

( Modified Internal Rate of Return : MIRR )

10 - 59

2. oo 1 }n eo( Terminal Value : TV )

3. no TV n MIRR

10 - 60

0 1 2 3 4Cash Flows - 1,000 500 400 300 100

330484665.50

1,579.50

k = 10 %k = 10 %

k = 10 %

PV of TV 1,000NPV = 0

MIRR = 12.1 %Terminal Value (TV)

10 - 61

54

1. oj2. 3. o4. o5. o

o6. on

13 - 3

on o ojo

1. oj1. oj

13 - 4

o ( o o o ) oo (P0) (trade off)n E (ROE) EPS o (risk) o

13 - 5{no{no{no

1. 2. 3. n4. o ooo

13 - 6

55

2. 2.

1. 2. Operating Leverage

3.

13 - 7

nno ( Return on Invested Capital ROIC ) on

Capital = + no}o

ROIC no oROIC = NOPAT = NI to commonstockholders +

After-taxinterest payments

Capital Capital

( 1 ) (Business Risk)( 1 ) ( 1 ) ( (Business Risk)Business Risk)

13 - 8

ROIC = ROE = NI to common stockholdersCommon equity

non ROE

13 - 9

n ROE = ROICn ROE = ROIC {n{n1. oo ()2. 3. {4. o{

5. rnon6. on7. o

13 - 12

56

( 2 ) Operating leverage ( 2 ) Operating leverage ( 2 ) Operating leverage Operating leverage o

oo}o ooono o

no}o

13 - 13

QBE FQBE F= P - V

13 - 15

Output o ROE = 0 EBIT = 0

EBIT = PQ - VQ - F = 0

13 - 17

A A A B B B

Sales

Rev.TC

FCSales

Rev.

TCFC

Profit

Loss

(n)00

(n)EBIT = 0 EBIT = 040 60

( 3 ) o (( 33 )) oo

o WACC }oo P0 o

oo WACC nn

13 - 57

57

1. 2. oo

4. 5. oo

o

3.

4. o4. o13 - 65

1. nnor2. nn3. no o4. ooon

5. oo

6. onn EBIT

onnn

ono

o o M & M oo M M & M & M

13 - 66

o()

0 D1 D2 Leverage ( D/A )

20 o

13 - 67 ( 1 ) ( 1 )

100% 100%

M&M oo o 2 nM&M oo o 2 n

n}nonn oon}nonn

oo

13 - 68

58


20

o ()

o

13 - 69( 2 ) oo(( 22 )) oooo

oooo

oooo

ooo 3 nooooo 3 noo

13 - 70

13 - 71oonooonoo

()


20o

oonooono13 - 72


20

o()

o

59

( 3 ) (Trade - Off Theory)( 3 ) (Trade - Off Theory) n n

ooo

o

roo ( no )

roo ( no )

o

13 - 73


20

o ()

noo

o

o

o ( D/A = 0 )

oooo ( - )

M&M ( ooo 2 )roonoo

ro (+)

13 - 74

ooooo noon D/A D1 ronoo oo D/A D2 oonroo D2 }o

ooro M&Moo 100 %

13 - 75

n}nnono

{ noon

no

noon

no

(n) (n)13 - 76

60

nn

( 4 ) ( 4 ) ( (Signaling Theory)Signaling Theory)

oono oono

ooo 5 oono (Symmetric information)ooo 5 oono (Symmetric information)

13 - 77

oonooonooono

(Negative)

nnonoonno

13 - 78

(Positive)

nononoon

on M&M oo

on M&M oo

onoon ( oo )

o

onoon ( oo )

o

13 - 79nono

o

13 - 80

oonoor oo{ o

61

14nrooo : {o

1. ooo{n2. { 3. {4. {5. {on

14 - 3

nnoonrn

n{nooo1. no

2. n n3. nnn

4. n

{ ( Dividend Policy ){ ( Dividend Policy )

14 - 5

1. ooo{n1. ooo{n14 - 6

ooon{n o nj

D1kS - g

=P0^

on}{

1. on{2. oo

oon

o

14 - 7

62

{ {

n

n{{

n{{

o

14 - 8

1. Dividend Irrelevance onnn{n

2. Bird - in - the - Hand : on{

3. Tax Preference : o{nn

on{ 3

14 - 9

1. Irrelevance2. Bird - in - the - Hand3. Tax Preference

oo{nno{{

o 3 o o 3 o14 - 15

no on n 2 : 1 oooo

o{ onn{ n no{ 10 % oo 100 o oo{ 10 o

8. o{no8. o{no14 - 45

63

no (Stock Splits)z ono

o

z on n no} n nnnoo

Ice Cream Parlor

Banana Splits

On Sale Now

15 - 2

16 - 21. r1. r

ro

ro}

Permanent Current AssetsPermanent Current Assets VS Temporary Current AssetsTemporary Current Assets

16 - 4

64

3. ConservativeApproach

3. ConservativeApproach

3 3

1. Maturity Matching(Self - Liquidating)

Approach

1. Maturity Matching(Self - Liquidating)

Approach

16 - 5

2. Relatively Aggressive Approach

0 e

r

ro

r

n

+ no}o +

roo

16 - 6

0 e

r

ro

r

n

+ no}o +

roo

16 - 7

0 e

r

r

r

n

+ no}o +

roo

16 - 8

บรรยายสรุปcompbm602 feb 1 2010 01

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