大三上金融建模ch6or

1、1Chapter 6: Choosing a Discount RateMain Topics:What is the appropriate discount rate?Calculation of the WACCCalculation of cost of equity, using The Gordon Dividend ModelNote: We will have more in-depth cover of the Free Cash Flow materials in Chapter 72Importance of Discount RateRecall:Whether we

2、are using the NPV or the IRR criterion, the discount serves as a benchmarkWe need to be sure that our discount rate is appropriate for the risk-level of our prospective projectsWhat will happen if we use a discount rate that is too high or two low?The commonly used benchmark: the weighted average co

3、st of capital (WACC)3Discount rateThe following terms are often used interchangeably in finance:Discount rateCost of capitalOpportunity cost of capitalInterest rateRisk-adjusted discount rateInvestors required return4Funding Cost as a Discount RateExample in the text:You have funds in a savings acco

4、unt that pays 4%You could invest those funds in a two-year CD that pays 5%Is CD a good investment? Whats your “Benchmark” rate?What factors do you need to consider?5Funding Cost as a Discount Rate6Funding Cost as a Discount RateIs this a failure of efficient markets?Lock-in riskInterest rate riskDef

5、ault riskIf the risks with the CD were higher than those of the savings account, NPV could be zeroWhat can you tell based on the NPV of CD, 188.61? 7Taxes and Funding CostFunding cost for corporations:Weighted Average Cost of Capital (WACC)Should the cost of equity and cost of debt be treated equall

6、y? Why?8WACC as the Firms Funding CostNote: The theory calls for use of “market weights”Meaning: For E & D, we should use market values rather than book values 9Example: XYZ Co.s cost of equity = 14%Cost of debt (before tax) = 9.5%Shares outstanding = 5 millionCurrent share price = $45Market value o

7、f debt = $100,000,000Tax rate = 36%WACC as the Firms Funding Cost10WACC as the Firms Funding Cost11Gordon Dividend ModelWhat is a stock worth?If your plan is to “buy and hold”, then the stock might be worth its expected dividends12rE Using Gordons ModelCurrent dividend yieldValue of growth13rE Using

8、 Gordons ModelCreate a data table for this company, showing how the cost of equity varies as the growth rate and the current share price varies14Cost of equity for Courier Corporation15Cost of equity for Courier Corporation162nd way to compute equity cost, Using Total Equity Payout17Related factors to considerShare repurchase v.s. additional dividendsShare repurchase v.s