TAILIEUCHUNG - Fundamentals of Corporate Finance Phần 8

PHẦN BỐN Vì vậy, họ đã thiết lập một chi phí công ty hoặc industrywide vốn là một điểm chuẩn. Đây không phải là tỷ lệ rào cản phải cho tất cả mọi thứ công ty, không có gì, nhưng phán xét điều chỉnh có thể được thực hiện cho các doanh nhiều rủi ro hơn hoặc ít rủi ro. | 452 section four relative risks at least in industries they are used to but not about absolute risk or required rates of return. Therefore they set a company- or industrywide cost of capital as a benchmark. This is not the right hurdle rate for everything the company does but judgmental adjustments can be made for more risky or less risky ventures. SOME COMMON MISTAKES One danger with the weighted-average formula is that it tempts people to make logical errors. Think back to your estimate of the cost of capital for Big Oil WACC ệ X 1 - r . j V X r. 1 .243 X 1 - .35 9 .757 X Now you might be tempted to say to yourself Aha Big Oil has a good credit rating. It could easily push up its debt ratio to 50 percent. If the interest rate is 9 percent and the required return on equity is percent the weighted-average cost of capital would be WACC .50 X 1 - .35 9 .50 X At a discount rate of percent we can justify a lot more investment. That reasoning will get you into trouble. First if Big Oil increased its borrowing the lenders would almost certainly demand a higher rate of interest on the debt. Second as the borrowing increased the risk of the common stock would also increase and therefore the stockholders would demand a higher return. There are actually two costs of debt finance. The explicit cost of debt is the rate of interest that bondholders demand. But there is also an implicit cost because borrowing increases the required return to equity. When you jumped to the conclusion that Big Oil could lower its weighted-average cost of capital to percent by borrowing more you were recognizing only the explicit cost of debt and not the implicit cost. Self-Test 7 Jo Ann Cox s boss has pointed out that Geothermal proposes to finance its expansion entirely by borrowing at an interest rate of 8 percent. He argues that this is therefore the appropriate discount rate for the project s cash flows. Is he right HOW changing capital structure AFFECTS .

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