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Corporation-Finance

Preface​

Thanks my teacher 's p p'， She is an excellent expert in corporate finance, and these notes are from his lecture.

01 Introduction​

  1. Financial Management Decisions [ working capital management , capital budgeting capital structure ]
  2. Forms of business organization
  3. Goal of Financial Management [ profit , costs , market share ]
  4. Agency Problem
    [ shareholders , creditors, employees , society, supply ]
  5. Financial Market and Corporation

代理人问题​

  1. managers vs shareholders
  2. controlling shareholders vs minority share
  3. shareholders and creditors

tunneling 掏空

占用，关联交易，违规担保。

02 Financial statement analysis​

  1. 平衡表
  2. 收入表
  3. 现金流
  4. Financial Ratio

Balance Sheet​

Assets = Debts + Equity

Market vs Book value​

book_value: " assets - liabilities ", historical cost, many valuable assets not be captured on balance sheet. （可能是负的）

market_value: per-share * numbers of shares （不可能是负值）

Net Working Captial​

Current assets - current liabilities

净营运资本不仅对分析公司很重要，还影响公司现金流量的计算。理解净营运资本公式对于确定公司是否从营运资本中产生现金或使用现金至关重要。

nwc usually grow with the firm. NWC的意义是operation过程中占用了公司自己多少钱。

存货、应收账款、预付账款都是公司在经营过程中占用的公司的钱（钱变成了存货存在仓库里，钱放在了上下游公司的账户里）

而应付账款、预收账款则是公司在经营过程中占用的上下游公司的钱，放在了自己的口袋里，相当于多出来的钱，所以要减掉。

另外NWC中并不是包含所有的cash，而只是包含用于operation中的流动cash。

作者：Saffron 链接：https://www.zhihu.com/question/65645534/answer/628328867 来源：知乎 著作权归作者所有。商业转载请联系作者获得授权，非商业转载请注明出处。

Income Statement （利润表）​

Operating Income= Revenue - cost - Expense - Depreciation

EBIT = operating income + other come

income statement is more like a video of firm's operations for a specified period of time.

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income is reported when it is earned even though no cash flow occurred.

Tax​

Marginal: the percentage paid on the next dollar earned.

Average: (the tax bill)/(taxable income)

Income is reported when it is earned , even no cash .

EBIT  - Interest - Tax = NetIncome

Cash Flow​

  • cash flow is one of the most important pieces of information that a financial manager can derive from financial statements.
  • the statement of cash flows does not provide us with the same information that we are looking at here
  • we will look at how cash is generated from utilizing assets and how it is paid to those that finance the purchase of assets.

cash flow from assets (Financial Cash Flow)​

  • cashflow from assets = cash flow to creditors + cash flow to stockholders
  • cashflow from assets = operating cash flow - net capital spending - (changes in nwc)

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The Statement of cash flows (会计上的计算)​

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the different between financial cash flow vs accounting statement of cash flow is :

主要是利息不同，会计上把"利息计算操作现金流"，公司金融计入"金融现金流"。

Financial ratio​

  1. short-term solvency or liquidity ratio
  2. long-term solvency or financial leverge
  3. Asset management or tunover ratio
  4. Profit ratio
  5. Market Value Ratio

computing liquidity ratio​

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Leverage Ratio​

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Net Debt=Total Debt − (Cash and Cash Equivalents)

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Coverage Ratio​

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Inventory Ratio​

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Receivable Ratio​

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Payable Ratio​

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Total Asset Tunover​

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Profitability Measure​

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EBITDA = EBID + DEPRECIATON + Amortization

Market value measure​

市值，PE Ration , EPS

案例-美股 7 姐妹​

杜邦等式​

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summary​

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Potential Problems:

Time-Trend Analysis , Peer Group Analysis , ratio 得综合看。

不同的公司模式，全球化不同会计税务准则，不同 fiscal years账务年，extrodinary events 极端事。。

03 The Time Value of Money​

  1. Net present value ,
  2. Arbitrage and law of one price
  3. FV and Compounding 复利 ,
  4. Present Value and Discounting 折现 ，
  5. Discount Rate 折现率，
  6. NPR (Number of Periods)
  7. Annuities and Perpetuities (年金，永续年金)
  8. Formulas for Annuities and Perpetuities
  9. APR AND EAR
  10. Nominal rate , Real rate , Inflation rate .

Annuities and perpetuities

A dollar today is worth more than a dollar in one year later.

the different in value between money today and money in the future is called the value of money.

Risk free interest rate

NPV = PV(Benefits) - PV(Costs)​

The investment decision is independent of consumption/saving decision .

Reject a project with negative NPV.

Arbitrage and the law of one price​

the law of one price : if equivalent invest opportunities trade simultaneously in different competitive market , then must trade for the same price in both markets . Arbitrage will quickly eliminate any price difference for equivalent investment opportunities.

Three Rules of Cash Time Travel​

  1. only value at the same point in time can be compared
  2. move cash forward time , compound it
  3. move cash back , discount it .

72 rule for compounding​

Yeas to double = 72/(interest rate in percent)

value a stream of cash flow​

C0 + C1/(1+r) + C2/(1+r)^2 ...

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Annuities and Perpetuities​

ordinary annuity ： 普通年金

annuity due: 即付年金

Perpetuities 永续​

infinite series of equal payments

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$$ P=C/R $$

Grown Perpetuity​

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Valuing Annuities​

finite series of equal payments

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Annuity due​

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Annuity FV​

PMT (Payment): The fixed amount paid at the end of each period. FV： future value

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valuing a growing annuity​

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APR （Annual Percentage Rate）​

$$ Period \ rate = APR/(number \ of \ peroids \ per \ year) $$

Effective Annual Rate (EAR)​

if you want to compare two alternative investments with different compounding periods you need to compute the EAR .

Remember the APR is the quote rate . (报价率)

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m 是期数

why is it important to consider effective rates of return ?

虽然 APR 一样，但是付款方式很不一样。

Continuous compounding 自然常数 e​

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2.71828

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Nominal Interest Rate & Real Interest Rate​

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Example - Annuity FV​

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Example - Annuity due different​

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Exampe - 多年支付年金​

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Summary Fomula​

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04 Investment Decision Rules​

  1. Capital Budgeting
  2. The Payback Rule 回收期
  3. The Discounted Payback 折现投资回收期
  4. Net Present value （NPV）
  5. The Internal Rate of Return
  6. Profitability Index （盈利指数）
  7. IRR (Internal Rate of Return)
  8. The Practice of Capital Budgeting

Capital budgeting​

  1. Estimate CF (in & outflows)
  2. Asses riskiness of CF
  3. Determine the appropriate cost of capital
  4. Evaluate project
  5. Accept/Reject Decision

独立，互斥项目。

Calculating Payback Period​

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payback period ignore the time value of money , ignore cash flow occurring after the payback period, require an arbitrary cutoff point .

Discounted payback Period​

计算现值。

NPV​

IRR​

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npv is a value measure , irr is the percentage measure. irr igonre the loan type,cash flow,interest rate.

irr 的一些问题

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Profitability Index PI​

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Capital Budgeting in Practice​

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05 Capital Budgeting​

  1. Calculate free cash flow
  2. Capital budgeting procedure
  3. case of Boeing
  4. Evaluate NPV estimates

Free Cash flow​

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利息费用不考虑，因为项目应该被评判基于他自身的，而不是如何筹措资金。 the rational is that the project should be judged on its own , not on how it will be financed.

Sunk costs

Opportunity costs

Cannibalization

Liquidation or Salvage value (清算价值或残值）

Terminal or Continuation Value 终值或持续价值

case of boeing​

Evaluating NPV Estimates​

  1. Sensitivity analysis 敏感性分析
  2. Scenario analysis 情景分析 （what happen only one underlying factor change)
  3. Break-even analysis 盈亏平衡分析

06 Stock and Bond Valuation​

  1. Bond cash flows and bond Valuations
  2. bond YTM
  3. Common stock vs Preferred stock
  4. Cash dividends and dividend Policy
  5. Dividends
  6. Dividend Discount Model
  7. Total Payout Model
  8. Discounted Free Cash flow Model
  9. Valuation based on Comparable Firms

Bond​

Par value

Coupon : promised interest payments

Coupon rate:

Maturity date 成熟期

Issued date 发布日

Yield to Maturity 到期收益率 also called promised yield

现值 == 未来值的折现 NPV（）

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Determinants of rate : Rd = r* + IP + DRP + LP + MRP

Rd: required return on a debt security (the discount rate)

r*: risk free interest

IP: inflation premium 通胀

DRP: default risk premium 默认违约风险

LP： Liquidity premium 流动性风险

MRP: maturity risk premium 利率风险

Treasury 国债

平价，溢价，折价交易

折价：bond's value falls below par, sells at discount.

bond value over time​

coupon rate < YTM , discount rate

YTM 的计算用 rate 函数（nper , pmt , pv ,fv , type , guess）

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zero-coupon bonds​

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Common Stock & Preferred stock​

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Cash Dividend​

Dividend policy high or low ? stable or irregular ? how frequent ?

正常股利，额外现金股利，特别现金股利, Liquidating dividend 清算股利，

固定股利支付，剩余股利支付。

Dividend policy​

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P49 如何计算。

Dividend Discount Model 股利折现模型​

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Common Stock Valuation​

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constant growth of dividend​

image-20250427140006373 $$ R_s \ is\ the \ expect \ return \ rate\ , g\ is\ grow\ rate . $$ image-20250427140234877

Non-constant Growth​

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Limitations of the Dividend-Discount Model​

公司不发股， 公司回购股票，不适用。

Total Payout Model​

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Discounted Cash flow model​

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股价：

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example [ wacc 11% , tax 37% , ]

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value based on Comparable Firms​

Valuation Multiple

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PE (focus on equity )

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Enterprise value Multiples 企业价值乘数

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Other Multiples

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Limiations of Multiples

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现实中，使用多种联合。

summary​

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07 Cost of capital​

why cost of capital is important ?

  • the return to investor is the same as the cost to compay
  • how market views the risk of our project
  • knowing our cost of capital help us determine our require return of project

Is there positive relationship between volatility and average returns for individual stocks ?

Risk and return​

三种风险：

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Systematic risk and beta​

Common Risks

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Beta

the expect percent change in the excess return of a security for a 1% change in the excess return of the market portfolio .

CAPM​

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WACC​

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Cost of debt​

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using capm

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cost of debt , after tax

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Cost of Preferred stock​

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不能抵税，上述忽略了税务成本。

Cost of Equity​

  • using retained earning k_s 表示
  • Issuing new common stock k_s(seo) 表示

用分红方法​

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how to estimating the dividend growth rate ?

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优劣

得付息，得增长，对增长率敏感，没考虑风险。

用 CAPM 方法​

BETA 的估算

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发行新股与发行成本​

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D_1 dividend , P0 现在的价钱，F 发行成本， 分红 g 增长率。

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A project's Cost of Capital​

项目的风险不总和公司一样，所以折现率不一样。 有时不能用 wacc .

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找一些类似公司，计算无杠杆 beta ， 找个平均数，CAPM计算。就是找参照公司有些难。

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简单点，评估项目风险， wacc 浮动处理。

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P70 页的 WACC 例题是要好好做做。

08 Capital Structure 1 - Perfect Market​

Equity vs Debt Financing​

发股，还是发债？

MM1：Leverage , Arbitrage , Firm value​

完美市场，公司价值就是所有资产产生的现金流总和，发股还是发债对公司价值无影响。

什么是完美市场？

  1. no tax
  2. 完全竞争
  3. 融资决策不影响投资决策

MM2: Leverage, Risk and Cost of capital​

Leverage and Equity cost of capital​

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WACC​

完美市场， WACC是恒定的。

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Levered and Unlevered Betas​

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Capital Structure Fallacies​

cash and net debt

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这里有一个例子， LV 举债的例子。总之，EPS 是增加了，但是风险也提高了，所以股价不变。

Equity Issuances and Dilution​

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09 MM with tax​

Valuing the interest tax shield​

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总结一下：

VL = VU + PV

VL = cashFlow/wacc-after-tax

VU = cashFlow/wacc-pre-tax

固定比例债务​

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Recapitalizing to capture and tax shield​

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Personal Taxes​

Optimal Capital Structure with Taxes​

Summary​

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10 Capital Structure 3 - Imperfect Market​

Financial Distress Costs and Firm Value​

Optimal Capital Structure : the Tradeoff theory​

Exploiting Debt Holders : the Agency costs of leverage​

Motivating Managers : the Agency Benefits of Leverage​

Asymmetric Information and Capital Structure : Pecking Order Theory​

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11 Capital Budgeting and Valuation with Leverage​

The weighted average cost of capital method​

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The APV Method​

The FTE method​

Project-based cost of capital​

12 Payout Policy​

Comparison of Dividends and Share Repurchases​

MM Dividend Irrelevance​

The Tax Disadvantage of Dividends​

Dividend Capture and Tax Clienteles​

Payout Versus Retention of Cash​

Signaling with Payout Policy​

Stock Dividends and Splits​