金融工程学-全英文ppt38-国际金融(编辑修改稿)

金融工程学-全英文ppt38-国际金融(编辑修改稿)内容摘要：

ition 1: Under Mamp。 M Assumption, ., in the frictionless environment, the total market value of a firm is independent of its capital structure. • Think of the firm as a gigantic pizza, divided into quarters. If now, you cut each quarter in half into eights, the M amp。 M proposition says that you will have more pieces, but not more pizza. — Merton Miller 20 The cost of capital depends on its use and not on its source. Proposition! 21 Comparison of Stocks between A and B State of the Economy EBIT Company A Company B EPS Net EPS (1 million shares) Earnings (600,000 shares) Bad business $5 million $5 $ million $ Normal business 10 10 Good business 15 15 Mean 10 10 Standard deviation 4 Beta NOTE: Each state of the economy is equally likely. 22 Weighted Average Cost of Capital Cost of capital of the firm without liability EDDrEDErW A C Cfe   EDrW AC CW AC Cr fe %10 AB W A C CW A C CRisk premium of WACC Financial leverage Mamp。 M Proposition 2: The cost of equity of a firm equals the cost of capital of the firm without liability and the risk premium of WACC multiplied by financial leverage. 23 All transactions in financial markets are zero – NPV transaction activities. Proposition! 24 Implication of Mamp。 M Theory • Frictionless environment does not exist in the real world. – Taxes – Transaction costs – Information asymmetry – Costs resolving conflict of interest • Liabilities are riskbearing 25 — Tax Shield Company A: Tax rate: T = 33% Company A Company B Claimant Creditors Shareholders Government Tax Authority Total Firm Value before Taxation $100 million $100 million 0 67 million 33 million Company。