【经济课件】CH16 MULTINATIONAL CAPITAL STRUCTURE AND COST OF CAPITAL.ppt

Chapter 16Multinational Capital Structure and Cost of Capital 16.1 Capital Structure and the Cost of Capital 16.2 Project Valuation and the Cost of Capital 16.3 The Cost of Capital on Multinational Operations 16.4 Sources of Funds for Multinational Operations 16.5 The International Evidence on Capital Structure 16.6 Summary Capital structure Capital structure the proportion of long-term debt and equity capital and the particular forms of capital chosen to finance the assets of the firm Capital structure Management must choose the proportions of debt and equity the currency of denomination fixed or floating rate interest payments indenture provisions conversion features callability seniority maturity The MNC’s financing opportunities The weighted average cost of capital The MNC’s cost of capital Optimal capital structure Far better an approximate answer to the right question, which is often vague, than an exact answer to a wrong question, which can always be made precise. John W. Tukey The perfect market assumptions Frictionless markets Equal access to market prices Rational investors Equal access to costless information MM’s irrelevance proposition With equal access to perfect financial markets, individuals can replicate any financial action that the firm can take. This leads to Modigliani-Miller’s famous irrelevance proposition: If financial markets are perfect, then corporate financial policy is irrelevant. The converse of MM’s irrelevance proposition V = St E[CFt] / (1+i)t If financial policy is to increase value, then it must either increase expected future cash flows decrease the discount rate in a way that cannot be replicated by individual investors. Financial market integration In integrated financial markets, real after-tax rates of return on equivalent assets are equal Factors leading tofinancial market segmentation prohibitive transactions costs different legal and political systems regula