536-7a_note[1]

536-7a_note[1] - 536-7a_note, 11S FIN 536 SU Page 1 of 10...

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Unformatted text preview: 536-7a_note, 11S FIN 536 SU Page 1 of 10 Topic 7 Global Financing (Chapter 14-16) I.Outline A.Sources of Capital B.Cost of Capital 1.Skip pp. 379-402 C.Sourcing in global money market D.Sourcing in global bond market E.Sourcing in global equity market II.Homework Assignment Chapter141516End-of-Chapter Question2, 34, 73, 4, 9End-of-Chapter Problem4No2, 3, 5Exam Sample Problem No No 1-4 Supplementary Homework ProblemNoNo1-5========================================================= 536-7a_note, 11S FIN 536 SU Page 2 of 10 Class Notes I.Raising Capital : A US company needs to raise capital of $100 M $ Non-$ On-shore market Off-shore market Euromarket On-shore market Off-shore market Euromarket Domestic Foreign Domestic Foreign Money Bond Equity A.Market quotation: See handout 536-7a_note, 11S FIN 536 SU Page 3 of 10 II.Cost of Capital A.Optimal Capital Structure 1.Minimize WACC VDtkVEkWACCde)1(2.Cost of Equity a)Risk-Premium approach: CAPM ke= (1)mjmjj*,b)DCF approach: Constant Dividend Growth Model: ke= 3.Cost of Debt a)Risk-Premium Approach: Risk-free + Risk premium kd= b)DCF Approach: IRR (1)Time Line: How many time periods? (2)CF: Which currency? How much is the principal? What is the interest expense? (3)PV: Discounted CF 0 1 23 536-7a_note, 11S FIN 536 SU Page 4 of 10 B.Impact from global financing 1.Availability of Capital 2.Risk Reduction 3.Cost Reduction 4.Foreign exchange risk 5.Expectation of International portfolio investors C.Example: What is the WACC?...
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This note was uploaded on 11/07/2011 for the course FIN 536 taught by Professor Staff during the Spring '11 term at S.F. State.

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536-7a_note[1] - 536-7a_note, 11S FIN 536 SU Page 1 of 10...

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