risk, return, and capital budgeting.ppt

,Irwin/McGraw-Hill,Chapter10,FundamentalsofCorporateFinanceThirdEdition,Risk,Return,andCapitalBudgeting,Irwin/McGraw-Hill,TheMcGraw-HillCompanies,Inc.,2001,天马行空官方博客：,TopicsCovered,MeasuringBetaPortfolioBetasCAPMandExpectedReturnSecurityMarketLineCapitalBudgetingandProjectRisk,MeasuringMarketRisk,MarketPortfolio-Portfolioofallassetsintheeconomy.Inpracticeabroadstockmarketindex,suchastheS&PComposite,isusedtorepresentthemarket.Beta-Sensitivityofastocksreturntothereturnonthemarketportfolio.,MeasuringMarketRisk,Example-TurboChargedSeafoodhasthefollowing%returnsonitsstock,relativetothelistedchangesinthe%returnonthemarketportfolio.ThebetaofTurboChargedSeafoodcanbederivedfromthisinformation.,MeasuringMarketRisk,Example-continued,MeasuringMarketRisk,Whenthemarketwasup1%,Turboaverage%changewas+0.8%Whenthemarketwasdown1%,Turboaverage%changewas-0.8%Theaveragechangeof1.6%(-0.8to0.8)dividedbythe2%(-1.0to1.0)changeinthemarketproducesabetaof0.8.,Example-continued,MeasuringMarketRisk,Whenthemarketwasup1%,Turboaverage%changewas+0.8%Whenthemarketwasdown1%,Turboaverage%changewas-0.8%Theaveragechangeof1.6%(-0.8to0.8)dividedbythe2%(-1.0to1.0)changeinthemarketproducesabetaof0.8.,Example-continued,MeasuringMarketRisk,Example-continued,PortfolioBetas,Diversificationdecreasesvariabilityfromuniquerisk,butnotfrommarketrisk.Thebetaofyourportfoliowillbeanaverageofthebetasofthesecuritiesintheportfolio.IfyouownedalloftheS&PCompositeIndexstocks,youwouldhaveanaveragebetaof1.0,MeasuringMarketRisk,MarketRiskPremium-Riskpremiumofmarketportfolio.Differencebetweenmarketreturnandreturnonrisk-freeTreasurybills.,MarketPortfolio,MeasuringMarketRisk,CAPM-Theoryoftherelationshipbetweenriskandreturnwhichstatesthattheexpectedriskpremiumonanysecurityequalsitsbetatimesthemarketriskpremium.,MeasuringMarketRisk,SecurityMarketLine-ThegraphicrepresentationoftheCAPM.,0,1,Beta,CapitalBudgeting&ProjectRisk,Theprojectcostofcapitaldependsontheusetowhichthecapitalisbeingput.Therefore,itdependsontheriskoftheprojectandnottheriskofthecompany.,CapitalBudgeting&ProjectRisk,Example-BasedontheCAPM,ABCCompanyhasacostofcapitalof17%.(4+1.3(10).Abreakdownofthecompanysinvestmentprojectsislistedbelow.Whenevaluatinganewdogfoodproductioninvestment,whichcostofcapitalshouldbeused?1/3NuclearPartsMfr.B=2.01/3ComputerHardDriveMfr.B=1.31/3DogFoodProductionB=0.6AVG.Bofassets=1.3,CapitalBudgeting&ProjectRisk,Example-BasedontheCAPM,ABCCompanyhasacostofcapitalof17%.(4+1.3(10).Abreakdownofthecompanysinvestmentprojectsislistedbelow.Whenevaluatinganewdogfoodproductioninvestment,whichcostofcapitalshouldbeused?R=4+0.6(14-4)=10%10%reflectstheopportunitycostofcapitalonaninvestmentgiventheuniqueriskoftheproject.,DerivationofCAPM,CapitalMarketLineIndividualsEfficientFrontierwithRiskFreeAsset,DerivationofCAPM,HomogeneousExpectation-OneMarketEfficienfFrontier:CapitalmarketLine(CML)TheSlopeofCapitalMarketLineis:,DerivationofCAPM,SeurityMarketLine(CAPM)IfaportfolioisconsistedofAandmarketportfolioMwithassetA,W%,andM,(1-W%),then,DerivationofCAPM,對W取一階導數:Wheninequilibrium,W=0and.,DerivationofCAPM,Theslopeoftheportfolioinequilibriumthenis:Sinceinequilibrium,theportfolioisequalthemarketp