Can I Sign Alabama Banking PPT

Can i industry sign banking alabama ppt now

Judy told we are now to discuss a module one of the weighted average cost of capital or one so basically the topics here are production until the capital structure go to the first line so as introduction will speak of with an average cost of capital so the definition is that it is related to financing so it is a cost of obtaining funds even though the pics of kinetic activity it is related to investing activity because what is used primarily for investing activities remember our discussion in capital budgeting which is investing activity is what bear okay next slide next is on the decision process involving what basically we will be discussing here the three decisions will be the definition manager mainly investing financing and operating before we go to the core product setback will make an analogy on a personal set of our personal finance in a personal finance which you think is the first decision or what is the range for personal finance its financing basically for example what to buy a cell phone a Samsung se what's the first thing that we need to do indeed money so either you borrow money you get money or you hear Ankara then you can appear a monkey one okay next is on the investing activity you find the actual cell phone unless is the operating so you can think after buying the cell phone you can make some changes you buy accessories you buy screen protector and you buy your casing and of course one of the major expenses and buying a new cell phone or even if it's not a new cell bodies of the payment for the loan I post later PB so you can see that in a personal finance system thing first but rather financing been investing been operating however in a corporate setup it's very difficult to apply that so like that massive why because if you raise money meaning you receive cash in exchange for once or equity securities or debit cash credit box fibular covered stuff you have a cost you need to pay for interest and of course evidence although it's not required not obligated unless you have retailer needs you need to pay for the course if you will not lose the money linguist and earn our interpreter then you cannot cover the cross so scientist element mostly when I'm an academic so basically in corporate finance what's the setup first thing that you need to do is to look for the best man okay what are the possible investment opportunities or projects available a B C or D next thing that you need to do is is to determine your cost of capital or your want after determining the one they can get decide to accept the project or that okay so we use the capital budgeting concepts that we've studied in Emma's later discussing to the video Center next is T our first decision involving cash during cycle path so there is a cash inflow you debit caps and the next is investing or financing you credit your tax and you invest in any cutting path as it like property but equipment investment in the equity securities you're subsidizing and so on and lastly you have your cash indoor-outdoor related to the day-to-day activities operation collection of AR or seals in it for producers accounts payable or expenses if you look at it the lastly of DVDs are just DVDs related to your personal finance so this are the activities involving cash flows so yeah you would eat at low you believe in personal finance but basically corporate capacity the first three okay you next is on the importance or uses of weighted average cost of capital so basically we'll be discussing creep importance or significance of what first is the I think the most familiar with you because we have discussed this in your MS Society Manila the subject capital budgeting so basically we use walk-in MVB entire are so I will go to the details of that later just to review next is an valuation of stocks so in our key national management one last term we discuss the corporate valuation mode remember in the corporate valuation model the formula of computing for d-sub price is we need first to get me the first portion is the market value of the company or the firm using the constant growth model or similar model with a person truth but we apply corporate set up this the free cash flow divided by the what - your growth rate in free cash flows and lastly I think this is the most entrenador to you it we need familiarity know is usable vision for mergers and acquisitions basically it's DCF after the number one and two are both decent because the constant period is that you get use the console present value you guys have to get the present value the benefits in the form of cash flows so basically you do the spar cycle member for the two money because my wife advice work is related with the mergers acquisitions you can do a pre or post validation so pre before why before company by strengthen because that's another competitor target company and aster just check now Phoenix is the certain what's the relationship of what we capital budgeting you already have an idea of this because we discussed this in our ns we'll review own look at the details first what is a little dependency investing right so it involves accounting equation so when we invest or we'll attempt at investing or financing activity so what happens to our assets the left side of the equation should essentially please same in your then equity it will also increase remember when you increase your daily equity so debit cash credit over stop or what stable you have a cause you need to pay for in today's and although it is not required we need also to give dividend so we have a cause so what happens is that the costs there the cost of capital is er one and then what you need to do is to look at the asset portion hopefully with investment those assets will be irate a veteran higher than the cost or the one okay for the project exactly that's your IRR by our method one of the missus methods in capital budgeting that exists of course these assets until costs so there is a cash outflow that's what you want the constraint decimal and then what do you do with these concepts you project your cash flows or the benefits you quantify them to get the present value you seek a certain discount rate that discount rate that we're going which we are using for the NPV is your wife so that's what you call and I open it at the present value the benefits are cash flows should be greater than the cost of investment that is your NPV so I get to summarize what's the rule or what's involvement of what in a capital budgeting in earlier are it is the cost of capital at the rate book for in imaging operator iron the higher the IRR when you accept the project and for the NPV so it is the discount they used to get the present value of the cash flows benefit to compare does it because on investment the higher present value for cash flows or Bank B projects of the project you'll be next we go to our web portal as you can see in the image a time please so you can see there the competition so just select influencing the actual formula that I will be showing to you so our what weighted average cost of capital is computed by getting the width so WD finds that so it's dead times Rd the interest rate - - tax free so go to the details of that why do we need to the data portion with the tax rate plus the week of the big red star five star rated at the big red stuff or cause of different Star Plus that we go to a common spot times that rate of return on common stuff or cost of common stock so you can see here the weights so there are variables D that's the market value of debt we see is the market value of a stock is a market value of preferred stock and then the total of the piece the week or the total market value of the entity a so as I mentioned so that what it is the weight of the debt that will be with professor WC with the common stock and then for the letters these for the market value of debt P for the preferred stock C common stock and B Square the total value in then the Rd is the interest rate it's the for the death a you apply tax so the objective source of death is punch 1 - Part C so our piece because of pretty red spot then further cause of equity we have to we have the boss of Internet equity research Equity Research and slide to discuss the details of that RS is for the cost of reading trainings internal equity Rd or urgently to distinguish it from our dividend areas are some pieces that was of the home and stuff next is the select is the sample application of the formula so we are we given problem so you're the market value for that is 50 million cover that is 25 million rivets at least nvidia the interesting is 5% cost of preferred stock is 10% respected 83% our tax rate is 30% given this information what is the what so we apply the formula it's 30% 30% is computed as the market value of Delta K suited media divided by the total of the flea market values 15 25 and 10 15 Indian so 15 million divided by 15 is a 30% by its 5% interest rates I said - 20 % the 20% is the weight of the paper shot which is a pending over 50 million by step press enter cross of preferred stock plus 50 percent weight of the common stock that's 25 business / 59 fine 15 percent because of equity get 10 points 55 percent if you get the same in your group with answer this similar problem okay very good now we'll be discussing the capital structure in the web formula it pertains to need percentages the ways of death paper it's a common stock that's why so capital structure pertains to the proportion of your debt be print stuff and common stuff so I think this one goes important parts or slides of this module so we need to get the best capital structure because that the orbital optimal capital structure so what what is or how do we describe the optimal capital structure it is the capital structure which will maximize the shareholder value of our specific terms it will maximize the stock price and at the same time it will minimize our work for deposit practical so how can this concepts maximize shareholder value max my stock price and invite circle together we'll be using those concepts and knowledge that you learned in our valuation of stats that is the last topic for penguin precious to be DM for dividend discount model I did a little bit of a teenager here because I get that show you the formula I just described it for the dividend discount model the competition of the cosmic video artists using the Gordon model is artists well to your v1 or expected libitum over your sub price basically as you can see if you have using this formula if you have a higher stock price will get a lower R sub S or cousin technique or rate of return on equity so a lower cost of equity use in what will give you a lower one and then for the CDF or the corporate valuation model using the similar color model in constant growth model when we compute for the market value of the firm that is the free cash flow as your numerator divided by your 1 minus your growth rate and recast as you can see there if we have and over walking that in a minute or it will have the higher effect will get a higher market value prefer higher market value of the firm will give you a higher market point of the equity hence higher priced the second seed relationships of this beastly using the tool for the higher value we leave the higher price and a lower water postcard even next about the capital structure is the current capital structure what is the current capital structure this is but basically the capital structure the portion of your liability is equity that can be seen in your vanity but it is a historical amounts in the question is is the capital current capital structure the same with the optimal capital structure there is no because of the multitude of software the sitter's hundred factors which will give you the ultimate goal which is serve older value but can de current capital structure be the same with optimal capital structure the answer is definitely gives of the assumption that the current structure structure in neurobiology if your optimal based on the criteria of the company in determining of another optimal capital structure next still at the capital structure we go deeper about the capital structure so what is our hierarchy in determining which values for which percentages to be used for the capital subject the first thing the reading speed is a target capital structure so probably there are direct criteria which the company can send to the driven extracted capital subject if no target capital soccer is given especially problems then you can use the capital structure or the percentages of death paper it's often almost based on their market values specifically how big is the market value are in example in getting the market values so there are valuation models the DCF and others but a plain simple way of doing this is to for the equity you get the shares number of shares of signing time by the stock price you call that the market capitalization market capitalization for that you can get the present value of the cash flows using this year the one that we learned in the valuation ones also you can use the the market quotation write divide there are buds are coated up 109 percent or 95 percent of the base value can post use that as your market value step and lastly if you don't have the target and market values tell us is the book values so you get the values in the balance sheet you get the percentages of that then you get the wings what paper such is the par value for the common stock you get the par value the update or sure premium and retain earnings we add a fee that will be the book value of the common stuff it for debt basically or what is recorded in the books asserted is yours book value another important concept about this one is what amount should be included in the capital structure basically we include only long-term sources equities long-term debt long-term debt so because we are focused on investors of five funds meaning we're focused on the funds that we raise from the investors that we'll be using for investment to protect the assets so what then SD status or highly literate liabilities so basically when general current liabilities are excluded specifically accounts payable and accruals because they are not investors of life a piece from your credit from your purchase which are suppliers or vendors for approvals your rules pertaining to your service providers rules of utilities read the others okay however we know into some treatments by other authors my good friends bring commitment and really so prepared I talked with them again just kidding first it's on the other country abilities in what does bring can say you can also leave this in the are dragon aspects that short-term interest bearing notes even current version of lots of this these are current liabilities but are included in the computation of the capital chakra specifically the percentage of debt and then for we need the point of rule of release that you include only those demanded by the investors of course not stable and approvals are out however is specific that in certain cases if it is clear that the short-term debt is used to finance a lot of investment which is our investment investing musician or short term debt is roll over meaning it with mature next year it will be roll over the following year so basically it is long term in nature now it becomes permanent so it is included in the of death okay and then for forgiveness he did not mention anything about the specifics of current liabilities or other current liabilities other than a fee for approval you mentioned that all current abilities are excluded so we can assume so it seems to appear that other grantee Buddha's are also excluded in the computation of the weight of death as for shipment you now we go to the sample illustrations he will be answering some decisions from the book we first is our question theory 10-3 page 359 so my suggestion is the hypothesis for a short period and then after you go back and resume to determine the answer okay okay done so the question here is how should the capital structure which you seek a little applicator me so we'll discuss this in a previous slide so first you determine if there is a given type capital structure it makes you get the percentages you see the wagon values is given or can be determine and lastly use the book values the amounts in the books okay next one is problem 10 - 9 th species again postage for short periods of time you need given the problem the answer and then go back for the solution ok click done so in this problem so this is the solution in this problem we are given a policy then you are given details such as because of equity CC / same cause of for tax so it's before tax cause of death 30% absolute is 40 percent you're given the number of years 570 n for pickles stop price sir absolutely further important also is the statement that assumed that we first launched our dead cells at our value X so this is our solution first for that D we use the 1 1 5 2 why because it is stated that the first long-term death cells for par value meaning the Powerball is the same with the one-fives question if it is not written here do we automatically use the book value which is 1 1 phi2 the answer is no these during the kishin's that you can compute for me market value but probably you're given interest rate and you're given the principal or the amount and the coupon payment you can compute 4d value but valuation of buttons for if there is a market position that the bond sells for this amount you would it later pick up our value you get the invite while it's an automatic but piece in the given problem it is not indicated you can compute for market value played so you use B book value 1 1 5 2 and for the common stock you have the book value 1 7 2 8 but you can compute for the market value using the grey market capitalization you would it like 5 ms accessory for pesos you get to the awkward then you get the total value you add the to the total value my get values of debt and equity is p 4 5 6 then you get the weights so 1 1 by 2 divided by p 4 5 6 33% for the dead weight of death and for the equity is totally go for divided by three four five six sixty six point sixty seven percent as per the what we just apply the formula 13 percent minus one minus 40 percent by 33 percent then plus 16 percent by 6 is 42 seven percent did you get the one is 13 point when is a represent did you get the same okay very good