MF 39‚4 Ownership structure‚ capital structure‚ and performance of group affiliation 404 Evidence from Taiwanese group-affiliated firms Received 25 December 2011 Revised 13 September 2012 18 December 2012 Accepted 18 December 2012 Jonchi Shyu Department of Business Administration‚ National Taiwan University of Science and Technology‚ Taiwan‚ Republic of China Abstract Purpose – This study seeks to examine how agency problems and internal capital markets in group-affiliated
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4-6 | Risk‚ Return and the Cost of Capital | 4 | Week 7-9 | Corporate Financing and Capital Structure | 5 | Week 10 | Payout Policy | 6 | Week 11 | The Efficient Markets Hypothesis and Behavioural Finance | 7 | Week 12-15 | Introduction to Option Pricing Theory | Coverage: 1. Project Evaluation Criteria Market-based project evaluation criteria‚ Net Present Value (NPV)‚ Internal Rate of Return (IRR)‚ Profitability Index (PI) Relevant costs in capital budgeting‚ Break-even‚ sensitivity
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Therefore‚ adopting what kind of discount rate in evaluating a new project will be the key of whether or not to proceed with the project. The most recent studies on the combination of MM theory and CAPM model are based on the formula of cost of capital‚ which could get a beta equation of levered firm and unlevered firm. However‚ when we treat a company as an asset portfolio‚ the risk factor of the asset is the weighted average risk of equity and debt. From the definition of debt risk in MM theory
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the developing countries started liberalizing their financial sectors. Increased emphasis was put on the development of equity markets. India also followed this path. Stock markets grew rapidly in India during the late 1980s and early 1990s. Capital markets have taken a prominent place in the developing countries financial system during the last decade. Given this backdrop‚ it is important to assess the impact of stock markets on a countrys economic development. One of the most obvious and
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Markets 13. Equity Investments 14. Fixed Income Investments 15. Derivatives 11.1 Introduction 11.2 Agent-Principle Relationship 11.3 Capital Budgeting Basics 11.4 The Cost of Capital 11.5 Cost of Retained Earnings 11.6 Cost of Newly Issued Stock 11.7 Target Capital Structure 11.8 Marginal Cost of Capital 11.9 Factors Affecting the Cost of Capital 11.10 Payback Period 11.11 Net Present Value (NPV) and the Internal Rate of Return (IRR) 11.12 The NPV Profile 11.13 Cash Flow and NPV Applications
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about the cost of capital? a. Leverage increases Beta for the firm since debt to equity ratio increases from unlevered beta. We use 10 year Treasury bond as our risk free rate and for market risk premium we use current prime lending rate for June 2007 minus10 year TRSY bond. Using these assumptions with increase in Debt‚ cost of equity increases for all the different capital structures. Interesting observation with cost of capital is that having debt in your capital structure decreases your WACC
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Modigliani-Miller capital structure irrelevance propositions and the concept of debt tax shields. With the background of a pizza company‚ the case provides an engaging context to discuss the “pizza graphs” that are commonly used in corporate finance curriculum to illustrate the wealth effects of capital structure decisions. Objectives: * Introduce the Modigliani-Miller intuition of capital structure irrelevance; * Establish how the cost of equity is affected by capital structure decisions
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risk. Capital Structure refers to the mix of sources from where the long term funds required in a business may be raised‚ i.e.‚ what should be the proportions of equity share capital‚ preference share capital‚ internal sources‚ debentures‚ and other sources of funds in the total amount of capital which an undertaking may raise for establishing its business. A bad financing decision may result in many forms of higher direct or indirect costs‚ such as lowering stock price‚ higher cost of capital and
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Assignment on An Appraisal on Dividend Policy and Capital Structure of Fu-Wang Ceramic Industry Ltd. Corporate Finance (FIN-507) Sec-01 Prepared For: Dr. Tanvir Ahmed Chowdhury Department of Business Administration East West University Prepared By: Md. Iftekharul Haque ID: 2009-3-95-052 Shazzad Hossain ID: 2010-2-95-155 Md. Yahyea ID: 2009-1-95-040 Rakesh Mondal ID: 2010-1-95-025 Hasanuzzaman Chowdhuri ID:2009-1-95-095 Submission Date: March 30
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1. Why should a firm have a capital structure policy‚ i.e. a target debt ratio? A capital structure policy aims to balance the trade-off between the benefits of debt financing (interest tax shield) and the costs of debt financing (financial distress and agency costs). Every firm should set its target capital structure such that its cost and benefits of leverage ultimately maximise the firm’s value. Graham and Harvey asked 392 firms’ chief financial officers whether they use target debt ratios. Results
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