资本资产定价模型WACC

1、WACC and Debt Policy,Optimal Capital Structure?,M&M (Debt Policy Doesnt Matter),Modigliani & Miller (Proposition I) When there are no taxes and capital markets are perfect, the market value of a company does not depend on its capital structure.,The Value of the firm does not change with debt: VL = V

2、U,Return on Assets (wacc)No Taxes,Note: rA = WACC (with no taxes),M&M Proposition II,V = D + E,These should be Market values!,The cost of equity capital increases with financial leverage due to the increase in Risk!,r,D E,rD,rE,M&M Proposition II,rA = WACC,Risk free debt,Risky debt,Leverage and Retu

3、rns,Impact on Beta,Leverage and Returns,Impact on Beta,If the Beta of Debt is assumed to be Zero BD = 0 The Beta of the Levered Firm is Equal to the Beta of the Unlevered Firm (or Asset Beta) times One plus the Debt-to-Equity Ratio,Note: Equity betas are levered betas and asset betas are unlevered b

4、etas (L=E and U=A).,WACC (no taxes),WACC is the traditional view of capital structure, risk and return.,Capital Structurewith taxes,PV of Tax Shield = (assume perpetuity),D x rD x Tc rD,= D x Tc,Firm Value = Value of All Equity Firm + PV Tax Shield,VL = VU + TC x D,MM Proposition I with Corporate Ta

5、xes,MM Prop. I with Taxes,Debt,Market Value of The Firm,Value of unlevered firm,PV of interest tax shields,Value of levered firm,Optimal amount of debt,MM with Corporate Taxes,MM Proposition II with Corporate Taxes,r0 = the return on the all equity financed firm (the unlevered firm or the return on

6、the assets of the firm),Debt and Taxes,Impact on Beta,If the Beta of Debt is assumed to be Zero BD = 0,Remember, L is the equity beta for a firm with leverage, and U is the beta for the firm with NO debt,r,D V,rD,rE,WACC,MM with Taxes: WACC,r0,Financial Distress,Costs of Financial Distress - Costs a

7、rising from bankruptcy or distorted business decisions before bankruptcy. Market Value =Value if all Equity Financed + PV Tax Shield - PV Costs of Financial Distress,Financial Distress,Debt,Market Value of The Firm,Value of unlevered firm,PV of interest tax shields,Costs of financial distress,Value of levered firm,Optimal amount of debt,Maximum value of firm,WACC with Taxes,Important: The WACC Formula,Weighted Average Cost of Capital (with costs of financial distress),r,D V,rD,rE,WACC,Optimal amount of debt,Costs of Debt,Financial Dist