财务管理英文PPT课件

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1、 At the turn of the twentieth century financial topics focused on the formation of new companies and their legal regulation and the process of raising funds in the capital markets. The companys secretary was in charge of raising funds and producing the annual reports, as well as the accounting funct

2、ion.第1页/共369页 Business failures during the Great Depression of the 1930s helped change the focus of finance. Increased emphasis was placed on bankruptcy, liquidity management and avoidance of financial problems.第2页/共369页 After World War the emphasis of corporate finance switched from financial accou

3、nting and external reporting to cost accounting and reporting and financial analysis on behalf of the firms managers. That is, the perspective of finance changed from reporting only to outsiders to that of an insider charged with the management and control of the firms financial operations.第3页/共369页

4、 Capital budgeting became a major topic in finance. This led to an increased interest in related topics, most notably firm valuation. Interest in these topics grew and in turn spurred interest in security analysis, portfolio theory and capital structure theory.第4页/共369页Typical Finance Structure第5页/共

5、369页 Chief accountant is also called financial controller, whose responsibilities include financial reporting to outsiders as well as cost and managerial accounting and financial analysis on behalf of the firms managers. Corporate treasurer is in charge of raising funds, managing liquidity and banki

6、ng relationships and controlling risks.第6页/共369页Financial Goal of the Firm第7页/共369页第8页/共369页第9页/共369页第10页/共369页Agency problem第11页/共369页Agency Costs第12页/共369页 In order to lessen the agency problem, some companies have adopted practices such as issuing stock options (share options) to their executives

7、.第13页/共369页Financial Decisions and Risk-return Relationships Almost all financial decisions involve some sort of risk-return trade-off. The more risk the firm is willing to assume, the higher the expected return from a given course of action.第14页/共369页Risk and ReturnsRiskExpected Returns第15页/共369页Wh

8、y Prices Reflect Value第16页/共369页Organisational Forms第17页/共369页Nature of the organisational forms Sole proprietorship Owned by a single individual Absence of any formal legal business structure The owner maintains title to the assets and is personally responsible, generally without limitation, for th

9、e liabilities incurred. The proprietor is entitled to the profits from the business but also absorb any losses.第18页/共369页 Partnership The primary difference between a partnership and a sole proprietorship is that the partnership has more than one owner. Each partner is jointly and severally responsi

10、ble for the liabilities incurred by the partnership.第19页/共369页 Company A company may operate a business in its own right. That is, this entity functions separately and apart from its owners. The owners elect a board of directors, whose members in turn select individuals to serve as corporate officer

11、s, including the manager and the company secretary. The shareholders liability is generally limited to the amount of his or her investment in the company.第20页/共369页 Limited company (Ltd) and proprietary limited company (Pty Ltd) Ltd companies are generally public companies whose shares may be listed

12、 on a stock exchange, ownership in such shares being transferable by public sale through the exchange. Pty Ltd companies are basically private entities, as the shares can only be transferred privately.第21页/共369页Comparison of Organisational forms第22页/共369页The flow of funds Savings deficit units Savin

13、gs surplus units Financial markets facilitate transfers of funds from surplus to deficit units Direct flows of finds Indirect flows of funds第23页/共369页Direct transfer of funds第24页/共369页Types of securities第25页/共369页Broking &investment banking第26页/共369页Indirect transfer of fundsfinancialintermediaryfir

14、mssavers第27页/共369页Components of financial markets Primary and secondary markets Capital and money markets Foreign-exchange markets Derivatives markets Stock exchange markets第28页/共369页Primary andsecondary markets Primary markets Selling of new securities Funds raised by governments and businesses Sec

15、ondary markets Reselling of existing securities Adds marketability and liquidity to primary markets Reduces risk on primary issues Funds raised by existing security holders第29页/共369页Capital & money markets Capital markets Markets in long-term financial instruments By convention: terms greater than o

16、ne year Long-term debt and equity markets Bonds, shares, leases, convertibles Money markets Markets in short-term financial instruments By convention: terms less than one year Treasury notes, certificates of deposit, commercial bills, promissory notes第30页/共369页Reviews 第31页/共369页第32页/共369页Chapter 4:

17、Mathematics of Finance第33页/共369页Compounding and Discounting:Single sumsTodayFuture第34页/共369页We know that receiving $1 today is worth more than $1 in the future. This is due to OPPORTUNITY COSTS.The opportunity cost of receiving $1 in the future is the interest we could have earned if we had received

18、 the $1 sooner.TodayFuture第35页/共369页 Translate $1 today into its equivalent in the future (COMPOUNDING). Translate $1 in the future into its equivalent today (DISCOUNTING).?TodayFutureTodayFuture第36页/共369页Note:Its easiest to use your financial functions on your calculator to solve time value problem

19、s. However, you will need a lot of practice to eliminate mistakes. 第37页/共369页Future Value第38页/共369页Future Value - single sumsIf you deposit $100 in an account earning 6%, how much would you have in the account after 1 year?Mathematical Solution:FV1= PV (1 + i)1 = 100 (1.06)1 = $106第39页/共369页Future V

20、alue - single sumsIf you deposit $100 in an account earning 6%, how much would you have in the account after 2 year?Mathematical Solution:FV2= FV1 (1+i) 1 =PV (1 + i)2 = 100 (1.06)2 = $112.4第40页/共369页Future Value - single sumsIf you deposit $100 in an account earning 6%, how much would you have in t

21、he account after 3 year?Mathematical Solution:FV3= FV2 (1+i) 1 =PV (1 + i)3 = 100 (1.06)3 = $119.1第41页/共369页Future Value - single sumsIf you deposit $100 in an account earning 6%, how much would you have in the account after 4 year?Mathematical Solution:FV4= FV3 (1+i) 1 =PV (1 + i)4 = 100 (1.06)4 =

22、$126.2第42页/共369页Future Value - single sumsIf you deposit $100 in an account earning 6%, how much would you have in the account after 5 years?Mathematical Solution:FV5= FV4 (1+i) 1 =PV (1 + i)5 =100 (1.06)5 = $133.82 第43页/共369页Future Value - single sumsIf you deposit $100 in an account earning i, how

23、 much would you have in the account after n years?Mathematical Solution:FVn=PV (1 + i)n = PV (FVIF i, n )第44页/共369页 Example 4.1 Example 4.2 Example 4.3 Example 4.4第45页/共369页 Until now it has assumed that the compounding period is always annual. But interest can be compounded on a quarterly, monthly

24、or daily basis, and even continuously. Example 4.5第46页/共369页Future Value - single sumsIf you deposit $100 in an account earning 6% with quarterly compounding, how much would you have in the account after 5 years?Mathematical Solution:FV = PV (FVIF i, n )FV = 100 (FVIF .015, 20 ) (cant use FVIF table

25、)FV = PV (1 + I/m) m x NFV = 100 (1.015)20 = $134.68第47页/共369页Present Value第48页/共369页 In compounding we talked about the compound interest rate and initial investment; In determining the present value we will talk about the discount rate and present value. The discount rate is simply the interest ra

26、te that converts a future value to the present value.第49页/共369页 Example 4.7 Example 4.8第50页/共369页Present Value - single sumsIf you will receive $100 5 years from now, what is the PV of that $100 if your opportunity cost is 6%?Mathematical Solution:PV = FV / (1 + i)n = 100 / (1.06)5 = $74.73PV = FV (

27、PVIF i, n ) = 100 (PVIF .06, 5 ) (use PVIF table) = $74.73第51页/共369页Present Value - single sumsIf you sold land for $11,933 that you bought 5 years ago for $5,000, what is your annual rate of return?第52页/共369页Mathematical Solution: PV = FV (PVIF i, n ) 5,000 = 11,933 (PVIF ?, 5 ) PV = FV / (1 + i)n

28、5,000 = 11,933 / (1+ i)5 .419 = (1/ (1+i)5) 2.3866 = (1+i)5 (2.3866)1/5 = (1+i) i = 0 .19第53页/共369页 Example 4.9第54页/共369页Compounding and DiscountingCash Flow Streams01234第55页/共369页 Annuity: a sequence of equal cash flows, occurring at the end of each period.01234第56页/共369页If you buy a bond, you will

29、 receive equal coupon interest payments over the life of the bond.If you borrow money to buy a house or a car, you will pay a stream of equal payments.第57页/共369页Future Value - annuityIf you invest $1,000 at the end of the next 3 years, at 8%, how much would you have after 3 years? 0 1 2 3第58页/共369页M

30、athematical Solution:FV = PMT (FVIFA i, n )FV = 1,000 (FVIFA .08, 3 ) (use FVIFA table, or)FV = PMT (1 + i)n - 1 iFV = 1,000 (1.08)3 - 1 = $3246.40 0.08 第59页/共369页 Example 4.11第60页/共369页Present Value - annuityWhat is the PV of $1,000 at the end of each of the next 3 years, if the opportunity cost is

31、 8%? 0 1 2 3第61页/共369页Mathematical Solution:PV = PMT (PVIFA i, n )PV = 1,000 (PVIFA .08, 3 ) (use PVIFA table, or) 1PV = PMT 1 - (1 + i)n i 1PV = 1000 1 - (1.08 )3 = $2,577.10 .08第62页/共369页 Example 4.12第63页/共369页Interpolation within financial tables: finding missing table values Example 1: PV=1000(P

32、VIFA2.5%,6) Example 2: 1000=100(PVIFA?%,12 months)第64页/共369页Suppose you will receive a fixed payment every period (month, year, etc.) forever. This is an example of a perpetuity.You can think of a perpetuity as an annuity that goes on forever.第65页/共369页When we find the PV of an annuity, we think of

33、the following relationship:第66页/共369页Mathematically, (PVIFA i, n ) = We said that a perpetuity is an annuity where n = infinity. What happens to this formula when n gets very, very large? 第67页/共369页1 - 1(1 + i)ni第68页/共369页PMT iPV =So, the PV of a perpetuity is very simple to find:PV = PMT/i第69页/共369

34、页What should you be willing to pay in order to receive $10,000 annually forever, if you require 8% per year on the investment?第70页/共369页 Example 4.13第71页/共369页0123第72页/共369页$1000 $1000 $10004 5 6 7 8 Copyright 2000 Prentice Hall第73页/共369页Using an interest rate of 8%, we find that:The Future Value (a

35、t 3) is $3,246.40.The Present Value (at 0) is $2,577.10. 0 1 2 3第74页/共369页Same 3-year time line,Same 3 $1000 cash flows, butThe cash flows occur at the beginning of each year, rather than at the end of each year.This is an “annuity due.” 0 1 2 3第75页/共369页 0 1 2 3Future Value - annuity due If you inv

36、est $1,000 at the beginning of each of the next 3 years at 8%, how much would you have at the end of year 3? 第76页/共369页Mathematical Solution: Simply compound the FV of the ordinary annuity one more period: FV = PMT (FVIFA i, n ) (1 + i) FV = 1,000 (FVIFA .08, 3 ) (1.08) (use FVIFA table, or) FV = PM

37、T (1 + i)n 1 (1+i) i FV = 1,000 (1.08)3 - 1 (1.08) = $3,506.11 0.08 第77页/共369页 0 1 2 3Present Value - annuity due What is the PV of $1,000 at the beginning of each of the next 3 years, if your opportunity cost is 8%? 第78页/共369页Mathematical Solution: Simply compound the FV of the ordinary annuity one

38、 more period: PV = PMT (PVIFA i, n ) (1 + i) PV = 1,000 (PVIFA .08, 3 ) (1.08) (use PVIFA table, or) 1PV = PMT 1 - (1 + i)n (1+i) i 1PV = 1000 1 - (1.08 )3 (1.08) = 2,783.26 0.08 第79页/共369页Is this an annuity?How do we find the PV of a cash flow stream when all of the cash flows are different? (Use a

39、 10% discount rate).第80页/共369页Sorry! Theres no quickie for this one. We have to discount each cash flow back separately.第81页/共369页 period CF PV (CF) 0-10,000 -10,000.00 1 2,000 1,818.18 2 4,000 3,305.79 3 6,000 4,507.89 4 7,000 4,781.09PV of Cash Flow Stream: $ 4,412.95 第82页/共369页Retirement ExampleA

40、fter graduation, you plan to invest $400 per month in the stock market. If you earn 12% per year on your stocks, how much will you have accumulated when you retire in 30 years?第83页/共369页Mathematical Solution: FV = PMT (FVIFA i, n ) FV = 400 (FVIFA .01, 360 ) (cant use FVIFA table) FV = PMT (1 + i)n

41、- 1 i FV = 400 (1.01)360 - 1 = $1,397,985.65 .01 第84页/共369页House Payment ExampleIf you borrow $100,000 at 7% fixed interest for 30 years in order to buy a house, what will be your monthly house payment?第85页/共369页Mathematical Solution: PV = PMT (PVIFA i, n ) 100,000 = PMT (PVIFA .005833, 360 ) (cant

42、use PVIFA table) 1PV = PMT 1 - (1 + i)n i 1100,000 = PMT 1 - (1.005833 )360 PMT=$665.30 0.005833 第86页/共369页 Calculating Present and Future Values for single cash flows for an uneven stream of cash flows for annuities and perpetuities For each problem identify:i, n, PMT, PV and FVSummary第87页/共369页第88

43、页/共369页l In financial markets, firms seek financing for their investments and shareholders of a company achieve much of their wealth through share price movements.l Involvement with financial markets is risky.l The degree of risk varies from one financial security to another. 第89页/共369页Important pri

44、nciple第90页/共369页1926-1999：the annual rates of return in American financial market第91页/共369页Rates of return Historical returnThe return that an asset has already produced over a specified period of time Expected returnThe return that an asset is expected to produce over some future period of time Req

45、uired returnThe return that an investor requires an asset to produce if he/she is to be a future investor in that asset 第92页/共369页Rates of return NominalThe actual rate of return paid or earned without making any allowance for inflation RealThe nominal rate of return adjusted for the effect of infla

46、tion EffectiveThe nominal rate of return adjusted for more frequent calculation (or compounding) than once per annum第93页/共369页 When an interest rate is quoted in financial markets it is generally expressed as a nominal rate. For example, if a bank advertises that it will pay interest of 5% per annum

47、 on deposits, this interest rate is most likely to be the nominal rate. When inflation is deducted from this nominal rate, the real rate of interest is obtained. (But this is not exactly correct!) To be more precise, 第94页/共369页Interest rate determinants第95页/共369页Adjusting for inflation第96页/共369页Calc

48、ulating expected returns第97页/共369页Case study第98页/共369页Case study第99页/共369页第100页/共369页The above example illustrates that, Although it is extremely difficult to predict with accuracy what the return will be on an investment, what we can do is make predictions about the range of returns, the probabilit

49、y with which a certain return will eventuate and hence the return that we could expect to get. So, the expected rate of return may be defined as the weighted average of all possible outcomes !第101页/共369页第102页/共369页Risk What is riskThe uncertainty or variability or dispersion around the mean value Ho

50、w to measure riskVariance, standard deviation, beta How to reduce riskDiversification How to price riskSecurity market line, CAPM, APT第103页/共369页For a Treasury security, what is the required rate of return?第104页/共369页For a company security, what is the required rate of return?第105页/共369页For a compan

51、y stock, what is the required rate of return?第106页/共369页第107页/共369页1926-1999：the annual rates of return in American financial market第108页/共369页What is risk? The possibility that an actual return will differ from our expected return Uncertainty in the distribution of possible outcomes第109页/共369页Uncer

52、tainty in the distribution of possible outcomes第110页/共369页How do we measure risk? General idea: Shares price range over the past year More scientific approach: Shares standard deviation of returns Standard deviation is a measure of the dispersion of possible outcomes The greater the standard deviati

53、on, the greater the uncertainty, and therefore, the greater the risk第111页/共369页Standard deviation probability data第112页/共369页Calculating Standard deviation第113页/共369页Case study第114页/共369页Case study第115页/共369页Case study summary第116页/共369页Case study第117页/共369页Remember the trade-off!第118页/共369页Investor

54、s attitude towards risk Risk-averse: Try to avoid risk Risk-love Try to accept high risk Risk-neutral To be indifference to risk第119页/共369页Portfolios第120页/共369页Two-share portfolio第121页/共369页Simple diversification第122页/共369页Portfolio riskDepends on: Proportion of funds invested in each asset The risk

55、 associated with each asset in the portfolio The relationship between each asset in the portfolio with respect to risk第123页/共369页Questions第124页/共369页Two types of risk in a portfolio Diversifiable risk Firm-specific risk Company-unique risk Unsystematic risk Non-diversifiable risk Market-related risk

56、 Market risk Systematic risk第125页/共369页Possible causes of riskMarket risk Unexpected changes in interest rates Unexpected changes in cash flows Tax changes Foreign competition Overall business cycle Unexpected warFirm-specific risk A companys labour force goes on strike A companys top management die

57、s in a plane crash A huge oil tank bursts and floods a companys production area第126页/共369页How much diversification?第127页/共369页Before moving on, remember: Not all risk is equal; some risk can be diversified away and some cannot. As we diversify our portfolio, we reduce the effects of a company-unique

58、 risk, but non-diversifiable risk or market risk still remains no matter how much we diversify. The effect of diversification is greatest when the assets returns in a portfolio are perfectly negatively correlated. When assets returns are perfectly positively correlated, no risk reduction is achieved

59、. Standard deviation is a measure of total risk for a single asset. When the asset is included in a diversified portfolio, the more relevant measure of risk is market risk.第128页/共369页Level of market risk第129页/共369页Risk and return Investors are only compensated for accepting market risk Firm-specific

60、 risk should be diversified away第130页/共369页 Beta is a measure of a firms market risk or systematic risk, which is the risk that remains even after we have diversified our portfolio!第131页/共369页Beta: A measure of market riskA measure of: How an individual shares returns vary with market returns The “s

61、ensitivity” of an individual shares returns to changes in the market For the market: Beta = 1 A firm with Beta =1 has average market risk. it has the same volatility as the market A firm with Beta 1 is more volatile than the market A firm with Beta discount rate, the bond will sell for a premium If

62、the coupon rate discount rate, the bond will sell for a discount第162页/共369页Modified case studySuppose now our firm decides to issue 20-year bonds with a par value of $1,000 and semi-annual coupon payments. We still offer a coupon rate of 12% but immediately after issue, interest rates rise to 14%Wha

63、t happens to the price of these newly-issued bonds?第163页/共369页Case study第164页/共369页Yield to maturity第165页/共369页YTM exampleSuppose we paid $898.90 for a $1,000 par 10% coupon bond with 8 years to maturity and semi-annual coupon payments.What is our yield to maturity?第166页/共369页$898.90 = $50(PVIFAi,16

64、) +$1000(PVIFAi,16)Bond is selling at a discount to its par value ($1000). Therefore, YTM must be greater than the coupon rate (10%).第167页/共369页Trial and errorAt 10% the market value would equal par value as the coupon rate equals the required rate of return.Try 12% where I = 12/2 = 6% and n =8 x 2

65、= 16PV = $50(10.106) + $1000(0.394) = $899.30YTM must be very close to 12% as $899.30 is very close to the market value of $898.90. Lets continue the process to get a more accurate answer.第168页/共369页Trial and errorTry 14% where I =14/2 = 7% and n = 16PV = $50(9.447) + $1000(0.339) = $811.35Interpola

66、tionIPV12%$899.30? $898.90 14% $811.35第169页/共369页Interpolationd1=d2(d3/d4)D2 = .12-.14 = 0.02D3 = $899.30-898.90 = $0.40D4 = 899.30 811.35 = $87.95D1 = 0.02(0.40/87.95) = 0.00009Unknown rate = 0.12 + 0.00009 = .12009 or 12.009% 第170页/共369页 $I p.a. + ($M - $Po)/N years YTM = - ($M + $Po)/2YTM = 100+(1000-898.90)/8/(1000+898.90)/2YTM = 112.63/949.45 = .1186 or 11.9%Note: This is only a crude approximation and should not be used in professional applications!第171页/共369页Preference shares A hybrid sec