财务学原理与实务第12讲　资本成本.ppt

第12讲　资本成本 The cost of capital The cost of capital The dividend growth model The capital asset pricing model (CAPM) The cost of debt The weighted average cost of capital 1. The cost of capital 1.1 Definition of the cost of capital The cost of capital is the rate of return that the enterprise must pay to satisfy the providers of funds, and it reflects the risk of providing funds. The cost of funds that a company raises and uses, and the return that investors expect to be paid for putting funds into the company. It is therefore the minimum return that a company should make on its own investments, to earn the cash flows out of which investors can be paid their return. The cost of capital can be measured by studying the return required by investors, and then used to derive a discount rate for DCF analysis and investment appraisal. 1.2 the cost of capital as an opportunity cost of finance The cost of capital is an opportunity cost of finance, because of the minimum return that investors require. If they do not get this return, they will transfer some or all of their investment somewhere else. Here are two examples. If a bank offers to lend money to a company, the interest rate it charges is the yield that the bank wants to receive from investing in the company, because it can get just as good a return from lending the money to someone else. In other words, the interest rate is the opportunity cost of lending for the bank. When shareholders invest in a company, the returns that they can expect must be sufficient to persuade them not to sell some or all of their shares and invest the money somewhere else. The yield on the shares is therefore the opportunity cost to the shareholders of not investing somewhere else. 1.3 the cost of capital and risk Risk free rate of return + Premium for business risk + Premium for financial risk Cost of Capital a) Risk free rate of return This is the return which would be required from an investment if it wer