国际财务管理课件全.ppt

1、International Financial Management,2020/7/5,Ch1 An Overview,Textbook,E. F. Brigham, J. F. Houston. Fundamentals of Financial Management (10th edition). 沈洪涛, 沈艺峰改编. 高等教育出版社，2005.1,2020/7/5,Ch1 An Overview,Reference book:,中国注册会计师协会编 财务成本管理 中国财政经济出版社,2020/7/5,Ch1 An Overview,About the course:,Performan

2、ce Evaluation Course Attendance 15% Assignment 15% Final Exam 70%,2020/7/5,Ch1 An Overview,Overall requirements Prepare a mathematic calculator; Prepare some A4 paper and do homework timely; Taking Notes in class is necessary; Read financial news and think like a financial worker; share it with clas

3、smates.,2020/7/5,Ch1 An Overview,Ch1 Introduction,1.1 What is Finance and what is Financial Management? 1.2 Goals of Financial Management 1.3 Summary of the course,2020/7/5,Ch1 An Overview,1.1 What is Finance?,2020/7/5,Ch1 An Overview,What is Finance?,- money resources, income, etc. - supply or get

4、money for a project - the science of managing (private or public) money. ,2020/7/5,Ch1 An Overview,Three interrelated areas of the science of Finance,2020/7/5,Ch1 An Overview,What is Financial Management?,Financial Management is an area of finance dealing with the financial decisions economic subjec

5、ts make and the tools and analysis used to make these decisions. In this course, we mainly study the financial management of corporations, i.e., corporate finance.,2020/7/5,Ch1 An Overview,(1) About corporations,Forms of Business Organization : Sole proprietorship Partnership Corporation,2020/7/5,Ch

6、1 An Overview,Sole proprietorships Based on somewhat standardized accounting practices; Net income may reflect firms potential to produce cash flows over time. Re:pp.24,Reasons:,2020/7/5,Ch1 An Overview,INCOME SHEET SalesLess：Sales discounts and allowancesNet salesLess：Sales taxCost of salesGross pr

7、ofitLess：Selling expense General and administrative expense Financial expenseIncome from main operation Add：Income from other operations,2020/7/5,Ch1 An Overview,Operating income Add：Investment income Non-operating incomeLess：Non-operating expenseAdd：Adjustment to prior years income and expense Inco

8、me before taxLess：Income tax Net income,2020/7/5,Ch1 An Overview,some criticism :,Cannot reflect risk in future cash flows; cash? Account receivable? Cannot reflect time value of money; this year? next year? Cannot reflect the efficiency of investments; input-output? Earnings manipulation? inventory

9、 cost? Fixed asset depreciation? ,2020/7/5,Ch1 An Overview,Goal 2: Shareholder Wealth Maximization (or, Stock Price ) Maximization?,2020/7/5,Ch1 An Overview,This goal is now preferred because of the following reasons: Firstly, the purpose of setting up a business is to maximize the owners wealth;,20

10、20/7/5,Ch1 An Overview,Secondly, stock price maximization is better than profit maximization for the following reasons: (1)Current stock price relies upon current earnings, as well as future earnings and cash flow.,2020/7/5,Ch1 An Overview,穗恒运A中报预增2.2倍 股价累计上涨超一倍 天和财富网 2012年07月11日 09:14 导读：新快报讯记者陈庆麟报

11、道电价上调对企业业绩刺激仍在继续。昨晚，穗恒运A（000531）发布业绩预告显示，预计今年上半年公司净利润1.26元至1.45亿元，同比增长2.2倍至2.7倍，每股收益约在0.37元-0.42元。,2020/7/5,Ch1 An Overview,Basic factors that affect stock price (p.24),Projected cash flows to shareholders Timing of the cash flow stream Risk of the cash flows,2020/7/5,Ch1 An Overview,To be specific,

12、 the factors include :,Decisions made by management The external constraints Level of economic activity and corporate taxes Stock market conditions p.24 Fig.1-2,2020/7/5,Ch1 An Overview,(2)It reflects the capital input-output relationship; (3)It may reflect risk and timing of EPS.,2020/7/5,Ch1 An Ov

13、erview,Relationship between the 2 goals:,Profit maximization stock price maximization, despite a generally high correlation.,2020/7/5,Ch1 An Overview,2020/7/5,Ch1 An Overview,Now it is widely acknowledged that the primary financial goal is:,shareholder wealth maximization, or, stock price maximizati

14、on.,2020/7/5,Ch1 An Overview,But, still, management cannot ignore accounting profit/EPS. WHY? Other things to think about in financial management: Do firms have any responsibilities to society at large? Is stock price maximization good or bad for society? Should firms behave ethically? p.17 Agency r

15、elationship? p.19,2020/7/5,Ch1 An Overview,1.3 Summary of the course,One Goal Two Tools Four Blocks,Shareholder Wealth Maximization,Time Value of Money Risk and Return,Financing Decision Capital Budgeting Dividend Policy Working Capital Management,2020/7/5,Ch1 An Overview,One Goal,Two tools,Four blo

16、cks,2020/7/5,Ch1 An Overview,Assignment 1,Read textbook : pp.14-17 (The goals of the corporation); pp.23-25 (Managerial actions to maximize shareholder wealth; Does it make sense to try to maximize EPS?) Look for an example to show the stock price is affected by a certain event. Set up a Personal Ca

17、sh Flow Record, and improve your own financial planning.,2020/7/5,Ch1 An Overview,Personal Cash Flow Record,CHAPTER 2Risk and Rates of Return,Return and risk: concepts and measures Risk: Stand-alone risk VS. Portfolio risk Risk pricing: CAPM / SML,2020/7/5,Ch2 Risk and Return,2.1 Return and risk:con

18、cepts and measures,Rate of return: (Amount received Amount invested) Return = _ Amount invested For example: if $1,000 is invested and $1,100 is returned after one year, the rate of return for this investment is: ($1,100 - $1,000) / $1,000 = 10%.,2020/7/5,Ch2 Risk and Return,The above is the so-call

19、ed realized rate of return. For stocks you have not sold yet, it is more meaningful to talk about the Expected rate of return.,2020/7/5,Ch2 Risk and Return,Return distribution (continuous),Investment return possibility distribution.,2020/7/5,Ch2 Risk and Return,Return distribution (dispersed),“riskl

20、ess”,cyclical,countercyclical,2020/7/5,Ch2 Risk and Return,Return: Calculating the expected return for each alternative,2020/7/5,Ch2 Risk and Return,Summary of expected returns for all alternatives,Exp return HT 17.4% MP 15.0% USR 13.8% T-bill 8.0% Coll. 1.7% HT has the highest expected return, and

21、appears to be the best investment alternative, but is it really? Have we failed to account for risk?,2020/7/5,Ch2 Risk and Return,Investment risk,Risk: 1.Uncertainty; 2.The chance that some unfavorable event will occur. Investment risk: Uncertainty of the securities rates of return/prices; the proba

22、bility of earning a low or negative actual return.,2020/7/5,Ch2 Risk and Return,Investment return possibility distribution.,2020/7/5,Ch2 Risk and Return,How to describe risk? Standard deviation Coefficient of variance,2020/7/5,Ch2 Risk and Return,Risk measure 1:standard deviation,2020/7/5,Ch2 Risk a

23、nd Return,Example:some investment alternatives returns,2020/7/5,Ch2 Risk and Return,Standard deviation calculation,2020/7/5,Ch2 Risk and Return,Comparing standard deviations,2020/7/5,Ch2 Risk and Return,Comments on standard deviation as a measure of risk,Standard deviation (i) measures total risk. T

24、he larger i is, the more likely that actual returns deviate from expected returns. For investment alternatives with the same expected return, i is a good measure to compare stand-alone risk; But for alternatives with different expected returns, no.,2020/7/5,Ch2 Risk and Return,Comparing risk and ret

25、urn,* Seem out of place.,2020/7/5,Ch2 Risk and Return,Risk measure 2: Coefficient of Variation (CV),A standardized measure of dispersion about the expected value, that shows the risk per unit of return.,2020/7/5,Ch2 Risk and Return,Example: risk rankings by coefficient of variation,Coll has the high

26、est degree of risk per unit of return. HT, despite having the highest standard deviation of returns, has a relatively average CV.,2020/7/5,Ch2 Risk and Return,Whether to choose the one with the lowest CV depends on our Risk attitude,Risk preference?,Risk neutral?,Risk aversion?,2020/7/5,Ch2 Risk and

27、 Return,Investor attitude towards risk,Risk aversion assumes investors dislike risk and require higher rates of return to encourage them to hold riskier securities. P.60 Required investment return K=KRF + RP,2020/7/5,Ch2 Risk and Return,Risk premium (RP) the difference between the return on a risky

28、asset and less risky asset, which serves as compensation for investors to hold riskier securities. P.61,Risk premium,Return over riskless asset,Return over risky asset,2020/7/5,Ch2 Risk and Return,How to reduce risks?,Dont put your eggs in one basket! Is it so?,2020/7/5,Ch2 Risk and Return,2.2 Stand

29、-alone risk and Portfolio risk,2020/7/5,Ch2 Risk and Return,Stand-alone risk: the risk of holding just one asset. P.52 Portfolio risk: the risk of holding a group of assets p.62,Nobel Prize winner: Harry Markovitz,2020/7/5,Ch2 Risk and Return,A mix of different securities is called A portfolio Is a

30、portfolio good or bad? Decide its expected return and risk first!but, how?,2020/7/5,Ch2 Risk and Return,Calculating portfolio expected return,Expected return of a portfolio,2020/7/5,Ch2 Risk and Return,Example:,Assume a two-stock portfolio is created with $50,000 invested in both HT and Coll.,Expect

31、ed return of HT,Expected return of COLL,2020/7/5,Ch2 Risk and Return,An alternative method for determining portfolio expected return is:,2020/7/5,Ch2 Risk and Return,But, the risk of a portfolio, p , is generally NOT the weighted average of the of the component assets.,2020/7/5,Ch2 Risk and Return,C

32、alculating portfolio standard deviation and CV,Expected return of portfolio,2020/7/5,Ch2 Risk and Return,Comments on portfolio risk measures,p = 3.3% is much lower than the i of either stock (HT = 20.0%; Coll. = 13.4%). p = 3.3% is lower than the weighted average of HT and Coll.s (16.7%). Portfolio

33、provides average return of component stocks, but lower risk than the average of the component stocks.,2020/7/5,Ch2 Risk and Return,General comments about risk,Why? For a two-stock portfolio: Combining stocks not perfectly correlated in a portfolio generally lowers risk.,2020/7/5,Ch2 Risk and Return,

34、Most stocks are positively correlated with the market (k,m 0.65). 35% for an average stock.,2020/7/5,Ch2 Risk and Return,Now, lets create a portfolio by adding stocks one by one. What will happen to the portfolios risk?,2020/7/5,Ch2 Risk and Return,Creating a portfolio:,2020/7/5,Ch2 Risk and Return,

35、It means:,Diversification may reduce risk; But, it cannot eliminate risk.,2020/7/5,Ch2 Risk and Return,Breaking down sources of risk,Risk = Market risk + Diversifiable risk,The part of a securitys risk that cannot be eliminated by diversification. (p.68),The part of a securitys risk associated with

36、random events ;it can be eliminated by proper diversification. (p.68),2020/7/5,Ch2 Risk and Return,Market risk, such as: Unexpected changes in interest rates. Unexpected tax rate changes, foreign competition, and the overall business cycle,2020/7/5,Ch2 Risk and Return,Diversifiable risk (firm-specif

37、ic risk) The part of a securitys risk associated with random events ;it can be eliminated by proper diversification. (p.68) Such as: strike. top management change lawsuit CEOs health condition change,2020/7/5,Ch2 Risk and Return,Since diversifiable risk may be eliminated by proper diversification, t

38、o portfolio-holders, it is market risks that really matter.,2020/7/5,Ch2 Risk and Return,Yes. For example: Interest rate changes affect all firms, but which would be more affected: a) Retail food chain b) Commercial bank,Do some firms have more market risk than others?,2020/7/5,Ch2 Risk and Return,S

39、o, it is meaningful to measure market risk of different firms. But, HOW?,2020/7/5,Ch2 Risk and Return,(3)Beta: a measure of market risk,It measures how an individual stocks returns vary with market returns. Its a measure of the “sensitivity” of an individual stocks returns to changes in the market.,

40、2020/7/5,Ch2 Risk and Return,Beta coefficients for different firms,2020/7/5,Ch2 Risk and Return,beta = 1 : average market risk. The stock is no more or less volatile than the market. beta 1 : more volatile than the market. (ex: technology firms) beta 1 : less volatile than the market. (ex: utilities

41、) Most stocks have betas in the range of 0.5 to 1.5.,2020/7/5,Ch2 Risk and Return,Can the beta of a security be negative?,Yes, if the correlation between Stock i and the market is negative (i.e., i,m 0). If the correlation is negative, the regression line would slope downward, and the beta would be

42、negative. However, a negative beta is rare.,2020/7/5,Ch2 Risk and Return,Beta coefficients for HT, Coll, and T-Bills,2020/7/5,Ch2 Risk and Return,Comparing expected return and beta coefficients,SecurityExp. Ret. Beta HT 17.4% 1.30 Market 15.0 1.00 USR 13.8 0.89 T-Bills 8.0 0.00 Coll. 1.7-0.87 It see

43、ms that Riskier securities have higher returns.,2020/7/5,Ch2 Risk and Return,We know how to measure risk standard deviation or CV for overall risk beta for market risk. We know how to reduce overall risk to only market risk through diversification. Then, how to price risk ?,Lets have a break:,2020/7

44、/5,Ch2 Risk and Return,2.3 Risk pricing: Capital Asset Pricing Model (CAPM)/SML,2020/7/5,Ch2 Risk and Return,2.3.1 CAPM,For a risk-averse investor, when he undertakes higher risk, he will require higher rates of return as a compensation.,TB? 3% is OK. Stock? 7%!,2020/7/5,Ch2 Risk and Return,What is

45、the Required Rate of Return?,Required rate of return The return on an investment required by an investor given market interest rates and the investments risk.,2020/7/5,Ch2 Risk and Return,2020/7/5,Ch2 Risk and Return,Calculating required rates of return,CAPM: ki = kRF + (kM kRF) i = kRF + RPMi,kM :

46、market return, or return of an average-risk security. (kM kRF) : Market Risk Premium.,2020/7/5,Ch2 Risk and Return,What is the market risk premium(RPM)?,Additional return over the risk-free rate needed to compensate investors for assuming an average amount of risk. Its size depends on the perceived

47、risk of the stock market and investors degree of risk aversion. Varies from year to year, but most estimates suggest that it ranges between 4% and 8% per year.,2020/7/5,Ch2 Risk and Return,An example,Assume kRF = 8% and kM = 15%. The market (or equity) risk premium is RPM = kM kRF = 15% 8% = 7%. Giv

48、en the betas of the five securities as follows:,SecurityExp. Ret. Beta HT 17.4% 1.30 Market 15.0 1.00 USR 13.8 0.89 T-Bills 8.0 0.00 Coll. 1.7-0.87,2020/7/5,Ch2 Risk and Return,Calculating required rates of return,kHT = 8.0% + (15.0% - 8.0%)(1.30) = 8.0% + (7.0%)(1.30) = 8.0% + 9.1%= 17.10% kM = 8.0

49、% + (7.0%)(1.00)= 15.00% kUSR= 8.0% + (7.0%)(0.89)= 14.23% kT-bill= 8.0% + (7.0%)(0.00)= 8.00% kColl = 8.0% + (7.0%)(-0.87)= 1.91%,2020/7/5,Ch2 Risk and Return,Note: The above are the required rate of return investors decide by the pricing model CAPM. What will you find if you compare them with the

50、expected rate of return we calculated before?,2020/7/5,Ch2 Risk and Return,Expected vs. Required returns,2020/7/5,Ch2 Risk and Return,Actually just these differences provide you with the opportunity of arbitrage!,2020/7/5,Ch2 Risk and Return,2.3.2 SML: security market line,When the RPm and KRF are f

51、ixed, based on the CAPM model, we may draw a line to show the relationship between risk measured by beta and the required rate of return for individual securities. (p.76) This line is called SML.,2020/7/5,Ch2 Risk and Return,Illustrating the Security Market Line,2020/7/5,Ch2 Risk and Return,SML equa

52、tion applies to individual asset as well as a portforlio; The coefficient of a portfolio Is the weighted average of the s of the component assets. P = w1 1 + w2 2 +,2020/7/5,Ch2 Risk and Return,An example:Equally-weighted two-stock portfolio,Create a portfolio with 50% invested in HT and 50% investe

53、d in Collections. The beta of a portfolio is the weighted average of each of the stocks betas. P = wHT HT + wColl Coll P = 0.5 (1.30) + 0.5 (-0.87) P = 0.215,2020/7/5,Ch2 Risk and Return,Calculating portfolio required returns,The required return of a portfolio is the weighted average of each of the

54、stocks required returns. kP = wHT kHT + wColl kColl kP = 0.5 (17.1%) + 0.5 (1.9%) kP = 9.5% Or, using the portfolios beta, CAPM can be used to solve for expected return. kP = kRF + (kM kRF) P kP = 8.0% + (15.0% 8.0%) (0.215) kP = 9.5%,2020/7/5,Ch2 Risk and Return,Factors that change the SML,What if

55、investors raise inflation expectations by 3%, what would happen to the SML?,SML1,ki (%),SML2,0 0.5 1.01.5,18 15 11 8,D I = 3%,Risk, i,2020/7/5,Ch2 Risk and Return,Factors that change the SML,What if investors risk aversion increased, causing the market risk premium to increase by 3%, what would happ

56、en to the SML?,SML1,ki (%),SML2,0 0.5 1.01.5,18 15 11 8,D RPM = 3%,Risk, i,2020/7/5,Ch2 Risk and Return,Verifying the CAPM empirically,The CAPM has not been verified completely. Statistical tests have problems that make verification almost impossible. Some argue that there are additional risk factor

57、s, other than the market risk premium, that must be considered.,2020/7/5,Ch2 Risk and Return,More thoughts on the CAPM,Investors seem to be concerned with both market risk and total risk. Therefore, the SML may not produce a correct estimate of ki. ki = kRF + (kM kRF) i + ? CAPM/SML concepts are bas

58、ed upon expectations, but betas are calculated using historical data. A companys historical data may not reflect investors expectations about future riskiness.,2020/7/5,Ch2 Risk and Return,These unsolved problems may be solved through YOUR EFFORTS!,2020/7/5,Ch2 Risk and Return,Summary,How to measure

59、 risk (standard deviation, CV, beta) How to reduce risk (diversification) How to price risk (security market line, CAPM),2020/7/5,Ch2 Risk and Return,For a portfolio:,2020/7/5,Ch2 Risk and Return,2020/7/5,Ch2 Risk and Return,Assignment 2,1. Key definitions: (p. 81) Diversifiable risk Market risk Capital asset pricing model Beta coefficient Security market line,2020/7/5,Ch2 Risk and Return,2. True or