Financial Study and Analysis

1
Financial Study and Analysis
Dr. Kittipong S.
2
Topics

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Acquiring Capital

• Debt
• Equity

To determine an appropriate mix of Debt and
Equity (Stock) in a firm capital structure is
essential

• Using EPS/EBIT analysis
• Earnings per share/Earnings before Interest and
  Taxes
• Debt,cost of debt can endanger stockholders
  return
• Stock may concern dilution of ownership,stock
  price,future earning with all new share holders

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EPS-EBIT Analysis(in millions)

• Amount Needed 500
• Stock Price 40
• EBIT Range 1000 to 2000
• Tax Rate 26
• Interest Rate 5
• Shares Outstanding 350

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EPS-EBIT Analysis (in millions)

• Conclusion Company should use debt to raise the
  500 million

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• 1.???????????????????????????????
• 2.?????????????????????????????????????/?????
• 3.???????????????????????????
• 4.????????????????????????????????????????
• 5.?????????? 4 ?????????????????????????

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• ????????????????????????????????? 14.25
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????????????????????? (Capital Budgeting
Evaluating Cash Flows)
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??????????? Capital Budgeting

• ???????????????????????????????????????????
• ??????????????????????? ????????????????????
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???????????????????

• 1. ????????? CFs (inflows outflows).
• 2. ???????????????????? CFs
• 3. ???????? k WACC (weighted average cost of
  capital) ?????? project
• ????? NPV ??? IRR
• 5. ????????????? ??? NPV gt 0 ???/???? IRR gt WACC

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??????????? Payback Period
?????????????? ?????????????????????????????????
???????????????????????????????????
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Payback ?????? Project L
0
1
2
3
10
80
60
-100
CFt
37
Payback ?????? Project L
2.4
0
1
2
3
10
60
-100
CFt
100
80
-30
2 30/80 2.375 years

PaybackL
38
Project S
0
1
2
3
70
20
-100
CFt
50
39
Project S
1.6
0
1
2
3
70
20
-100
CFt
50
-30
1 30/50 1.6 years
????????PaybackS

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???????? Payback
1. ???????????????????????????????????????????????
(risk and liquidity) 2. ????????????????????????
?????????? Payback
1. ???????????????????????????? ( Time Value of
Money TMV) 2. ????????????????????? CFs
?????????????????? payback period.
41
Payback ???????????? (Discounted Payback)
0
1
2
3
10
10
80
60
CFt
-100
42
NPV ???????? PVs inflows and outflows.
43
Discounted Payback
0
1
2
3
10
10
80
60
CFt
-100
44
Discounted Payback
0
1
2
3
10
10
80
60
CFt
-100
60.11
PVCFt
-100
9.09
49.59
1
PVCF1 10 / (1 0.1) 9.09
2
PVCF2 60 / (1 0.1) 49.59
45
Discounted Payback
0
1
2
3
10
10
80
60
CFt
-100
PVCFt
-100
9.09
49.59
60.11
-41.32
Discounted payback
2 41.32/60.11 2.7 yrs

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NPV ???????? PVs inflows and outflows.
?????????????????? CF0 ???????????????
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????????NPV??? Project L
Project L
0
1
2
3
10
10
80
60
-100.00
9.09
49.59
60.11
18.79 NPVL
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?????????????????????????????? NPV (Net Present
Value ???????????????????)
NPV PV inflows - Cost
????????????????? ????????????? ??? NPV gt 0
(????????????)
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??????????????????????????????????????(Internal
Rate of Return IRR)
0
1
2
3
CF0
CF1
CF2
CF3
Inflows
Cost
IRR ?????????????????????????? PV inflows cost
???? NPV 0
50
???????? IRR ??????????? k ??????????? NPV0
IRR ???????? NPV 0, ?????????? IRR
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???????? IRR ??? Project L
0
1
2
3
IRR ?
10
80
60
-100.00
PV1
PV2
PV3
0 NPV
IRRL 18.13.
52
?????????????????????? IRR
??? IRR gt WACC, ???????????????????????????????
???????????????????????????????? ????????????
WACC 10, IRR 15.
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???????????????????????????????????????IRR

• ??? IRR gt k, ?????? project.
• ??? IRR lt k, ????????? project.

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???????????????????????????? (Sensitivity
Analysis)

• ?????????????????????????????????? ??? ????????
  ??? ??????????????????????????????????????????????
  (What-If Condition)