财务管理培训课程(英文版)

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1、Irwin/McGraw-HillChapter 10Fundamentals of Corporate FinanceThird EditionRisk,Return,and Capital BudgetingBrealey Myers Marcusslides by Matthew WillIrwin/McGraw-HillThe McGraw-Hill Companies,Inc.,2001Topics CoveredMeasuring BetaPortfolio BetasCAPM and Expected ReturnSecurity Market LineCapital Budge

2、ting and Project RiskMeasuring Market RiskMarket Portfolio-Portfolio of all assets in the economy.In practice a broad stock market index,such as the S&P Composite,is used to represent the market.Beta-Sensitivity of a stocks return to the return on the market portfolio.本资料来源本资料来源Measuring Market Risk

3、Example-Turbo Charged Seafood has the following%returns on its stock,relative to the listed changes in the%return on the market portfolio.The beta of Turbo Charged Seafood can be derived from this information.Measuring Market RiskMonthMarket Return%Turbo Return%1+1+0.82+1+1.83+1-0.24-1-1.85-1+0.26-1

4、-0.8Example-continuedMeasuring Market RiskWhen the market was up 1%,Turbo average%change was+0.8%When the market was down 1%,Turbo average%change was-0.8%The average change of 1.6%(-0.8 to 0.8)divided by the 2%(-1.0 to 1.0)change in the market produces a beta of 0.8.Example-continuedMeasuring Market

5、 RiskB=0.81.62When the market was up 1%,Turbo average%change was+0.8%When the market was down 1%,Turbo average%change was-0.8%The average change of 1.6%(-0.8 to 0.8)divided by the 2%(-1.0 to 1.0)change in the market produces a beta of 0.8.Example-continuedMeasuring Market RiskExample-continued-0.8-0

6、.6-0.4-0.200.20.40.60.81-0.8-0.6-0.4-0.200.20.40.60.81Market Return%Turbo return%Portfolio BetasDiversification decreases variability from unique risk,but not from market risk.The beta of your portfolio will be an average of the betas of the securities in the portfolio.If you owned all of the S&P Co

7、mposite Index stocks,you would have an average beta of 1.0 Measuring Market RiskMarket Risk Premium-Risk premium of market portfolio.Difference between market return and return on risk-free Treasury bills.0246810121400.20.40.60.81BetaExpected Return(%).Market PortfolioMeasuring Market RiskCAPM-Theor

8、y of the relationship between risk and return which states that the expected risk premium on any security equals its beta times the market risk premium.Market risk premium=r-rRisk premium on any asset=r-rExpected Return=r+B(r-r)mfffmfMeasuring Market RiskSecurity Market Line-The graphic representati

9、on of the CAPM.01Beta02040Expected Return(%).RfRmSecurity Market LineCapital Budgeting&Project RiskThe project cost of capital depends on the use to which the capital is being put.Therefore,it depends on the risk of the project and not the risk of the company.Capital Budgeting&Project RiskExample-Ba

10、sed on the CAPM,ABC Company has a cost of capital of 17%.(4+1.3(10).A breakdown of the companys investment projects is listed below.When evaluating a new dog food production investment,which cost of capital should be used?1/3 Nuclear Parts Mfr.B=2.01/3 Computer Hard Drive Mfr.B=1.31/3 Dog Food Produ

11、ction B=0.6AVG.B of assets=1.3 Capital Budgeting&Project RiskExample-Based on the CAPM,ABC Company has a cost of capital of 17%.(4+1.3(10).A breakdown of the companys investment projects is listed below.When evaluating a new dog food production investment,which cost of capital should be used?R=4+0.6

12、(14-4)=10%10%reflects the opportunity cost of capital on an investment given the unique risk of the project.Derivation of CAPM Capital Market LineIndividuals Efficient Frontier with Risk Free AssetE(R)RfMDerivation of CAPMHomogeneous Expectation-One Market Efficienf Frontier:Capital market Line(CML)

13、The Slope of Capital Market Line is:E(R)RfMCMLE(Rm)-RfmE(Rm)mMfMRRE)(Derivation of CAPMSeurity Market Line(CAPM)If a portfolio is consisted of A and market portfolio M with asset A,W%,and M,(1-W%),thenE(R)RfMACML),()1()()(MAPREWRWERE)21()1(2)1()(222EXPWWWWRiMMAPDerivation of CAPM對 W 取一階導數:When in eq

14、uilibrium,W=0 and .)()(MAPREREdWdRPMAAMMMAAMMAPWdWd222)2()()(|0MAWPREREdWdRMMAMPMAAMMWPdWd220|MPDerivation of CAPMThe slope of the portfolio in equilibrium then is:Since in equilibrium,the portfolio is equal the market portfolio,the slope of the portfolio in CML must equal to that of the market portfolio,the equation can constructed as follows:MMAMMAWPPREREddR/)()()(|20MfMRRE)(MMAMMARERE/)()()(2Derivation of CAPM簡化上式：In market model:SML2)()(MAMfMfARRERREAMAAARR2MAMAAfMfARRERRE)()(