Study on the Pricing Model of Power Generation Capital Costs

On 21/09/2013, in Agriculture, by rain

Cost of capital plays a very key role in the Enterprise financial Management anddecision-making. Its essence is an attitude which the investors anticipate theenterprise financial risk. Enterprises’risk determines the size of the cost ratio ofcapital. Common capital cost pricing model only definites and calculates interestsfrom liabilities and owner rights. It is not a full summary of Enterprise financial risk.And the power generation enterprises in China compare with other enterprises havetheir own particularity, so the current cost of capital pricing model cannot reflectfinancial risk of the electricity power Enterprise of our country.The SASAC revised of the” central person in charge of the enterprise operatingperformance evaluation procedures” for the central enterprises in 2006 and 2009whose cost rate of capital makes special provisions. The provisions make a reasonablestandard of central enterprises and state-owned enterprises related to comprehensivecapital cost rate, better reflect the financial risk of the enterprise; on the other hand,unified standard cases cover many problems of the state-owned enterprises. Thisarticle is made in this background.Financial risk is divided into system risk and non system risk. This articleresearches the power generation enterprises’financial risk. Financial risk is theresearch object. The power generation enterprises in China are the research samples.Their financial index data from 2008 to 2010 is the study of data. Through the wholepower industry comprehensive coefficient study, it determines the power enterprises’the system risk, and then calculate Electric enterprises Basic cost of capital; throughthe establishment of power generation enterprise’s financial risk model ,it evaluates asystem of power financial risk of generation enterprises. And on this basis, itdetermines the comprehensive capital cost rate’s adjustment value. Finally, in profitsfrom the predecessor research results as well as the central SASAC” person in chargeof the enterprise operating performance evaluation procedures” for the integratedenterprise capital cost rate determining method, this article establishes the cost of capital pricing model, which supplies generating electricity enterprise with modelsupport in determinesing its own comprehensive capital cost rate. It has a certainguiding significance for power generation enterprise in the promotion of integratedcapital cost rate.


Study on the Relationship between Information Disclosure of Corporate Social Responsibility and the Cost of Capital

On 30/08/2013, in Management, by rain

Most of the listing corporations in our country have equity financing as the mainchannel for funds, but the cost of equity financing is generally greater than the debtfinancing cost, so the enterprises hope that their capital cost can be kept in the ideal levelso as to reduce the financial burden. Empirical studies have confirmed that companies whodo a good job in the investor relations Management,can effectively reduce the cost ofequity capital.However, with the changes of Social environment and investors’ quality level,investors have also changed the requirement for information disclosure.They not onlyfocus on the company’s financial information, but alse on the non financialinformation.Corporate Social responsibility (CSR) performance information is theimportant part. Corporate social responsibility births in a long time.Over the past fortyyears,it has been an important topic of researches on the theory of capital markets, and inrecent years, the financial sector has a new Investment method-Investment in socialresponsibility,which promotes the investors focus more on corporate socialresponsibility.CSR information disclosure has become an important bridge betweenenterprises and investors to establish a good relationship.This article bases on the Shanghai and Shenzhen A shares of listing Corporation as asample,and tests and analysises the relationship between CSR and the cost of equity capital.The empirical results show that the corporate social responsibility information disclosurelevel has negative correlation to the cost of equity capital in the company, namely the highsocial responsibility information disclosure level can contribute to reducing the cost ofequity capital.The U type relationship between corporate social responsibility informationdisclosure and the cost of equity capital has not been confirmed, that is to say the currentlisting corporation social disclosure is not excessive, or that there is no serious exaggeratedfalse disclosure. Through this research, we can see that the corporate social responsibilityinformation disclosure has become an important factor affecting the listing Corporationmanagement.How to improve corporate social responsibility information disclosure on thebasis of investor relations Management is the issue that listing Corporations need toconsider.


Research on Performance Measurement Based-on EVA Concerning the Listed Company

On 23/08/2012, in Management, by rain

【Abstract】 The ultimate goal of listed companies is to achieve maximum shareholders’ wealth, this required that the enterprises’performance measurement system must reflect this concept. The traditional performance measurement systems can not measure shareholder value accurately because they do not consider the cost of equity capital. EVA performance measurement system overcomes traditional shortcoming, considering the opportunity cost of equity capital and rectifying the distortions of profit made by accounting principles, which reflect the value creativity and Economic efficiency of the company more accurately. Though EVA has been adopted in many world famous companies and helps them get prominent effects, it is a new concept in China. So it is necessary for us to introduce this advanced performance measures method to our domestic listed companies to establish an applicable EVA performance measures system. This thesis firstly introduced the Economic value added theory, including it’s development, theoretical foundation and essence, and has made detailed analysis in several kinds of performance measurement methods in theory, the result indicates EVA is a kind of performance measurements which accords with value Management, superior to the traditional performances measurement system , reflecting Enterprise’s value more objective than the accounting profit and computing the shareholder value created by company. Then combining the actual conditions of our country, the thesis did an exhaustive description to the technological content of EVA. On this basis, the thesis has done an empirical research based on the data of listed company on Shanghai Security Exchange in 2002, the result indicates that EVA is superior to the traditional performance measurements in measuring listed companies’value and shareholders’Investment return, which is according with theoretic analysis mentioned in above. In the last part of the thesis, it analyze the application effect of EVA performance measurement system which is carried on by Tsingtao Brewery Company Listed, and points out the influence factors of applying the EVA in Chinese listed companies.


Research on the EVA Evaluation Index

On 20/08/2012, in Management, by rain

【Abstract】 After China joined WTO, the liquidity of capital increase continually with the development of capital market .The investors are all eager to get higher return on capital. which call for corporation (especially for those come into the market)to manage in a high standard. Currently, how to deal with the puzzle with the relation of client and attorney has become the key question in the innovation of National Corporation, and the consistency with reward inspiriting system of operator and benefit become the most important issue. In order to find an effective institution to coordinate the incentive and constraint mechanism,the first thing we should do is to build an effective performance evaluation model for evaluating the manager’s performance Objectively and scientifically . The EVA system can provide effective method in solving the above questions.The paper explain the background of EVA firstly,then introduce theory basis of EVA and review the previous domestic and abroad study on EVA ,and also point out the significance of EVA applying in our country .The follow section of the paper begins with the analysis of traditional performance evaluation. The conclusion is that the Enterprise value could not be depicted by traditional evaluation systems vividly such as ROE and EPS. The main defects lay on two aspects. One is that only the debt capital is directly considered to the gain-or-loss of that year.However,the equity capital is usually overlooked.So the Judgment of Enterprise value is imprecise because of the inadequate cost calculation.The other aspect is that traditional performance evaluation system can cause the manager to take short-term action. On the base, the paper expatiates the Economic essence of EVA, and also discusses how to use EVA theory into our country.At last,the paper gives an example of applying EVA performance system., and summarize the merit and limitation of EVA. The paper’s goal is to adjust EVA to the need of our domestic corporation, and hope to give a valuable reference for the innovation of Chinese corporation.

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Research on the Net Present Value Rule in Corperate Investment Desicion

On 09/07/2012, in Management, by rain

【Abstract】 The paper is devoted to the research on the net present value rule in which the option is considered in corperate Investment decision. There are two problems to be solved in the traditional net present value rule. The first is predicting cash flow. The second is estimating the discount rate. Estimating discount rate is a key problem. The paper exerts its research on the following two aspects:Firstly, the paper gives the definition about discount rate from the efficient theory of capital market. The perfect market environment is the logical starting point of discussing discount rate. Discount rate should be appraised by capital market. Based on Markowitz’s portfolio theory and capital asset pricing model (CAPM), the paper discussed the relations between risk and return. In the perfect capital market, investors only earn the return matched with the risk and can not get the excessive return, i.e. some given risk corresponds with some return. This is hurdle rate of single financial security. At the same time, this gives the cost of the capital source in corperate Investment. So capital cost is a rational estimation of discount rate. Then, the paper argues the effect of capital structure to capital cost. So when the firm makes Investment decision, the weighted average capital cost may be used. But there are two assumes which must be satisfied. The first is that the project risks are the same as the firm. The second is that the project to be valued should be financed in the same proportions of debt and equity as the firm as a whole. But the project’s risks is not often consistent with the firm’s. How to deal with it? Based on the Modigliani and Miller’s theory on capital structure, the paper derived the relations between the weighted average capital cost when the firm is leveraged and the capital cost when the firm is unleveraged. So in order to attain the project’s discount rate, the capital cost when it is unleveraged must be first got. Thus the substituted firms in the capital market whose risks are the same as the project’s risks may be found. Through this relations, the project’s capital cost when it is unleverage can be gotten. Under the firm’s aimed capital structure, the project’s discount rare can be caculated.But the traditional NPV rule implies when the investment decision had be made, the project will be not changed. This ignores Management flexibility. The project can be abandoned or be contracted, i.e the flexibility is valuable. So if the option doesn’t be considered, the traditional NPV rule can bring the wrong conclusion. Based on the option <WP=6>pricing theory , the paper discussed five types of real option. And concluded that the value of real option should be considered in corperate investment decision

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The Analysis on Financing Environment and Methods of Hunan TV & Broadcast Intermediary Co.,Ltd.

On 02/07/2012, in Management, by rain

【Abstract】 Hunan TV & Broadcast Intermediary Co., Ltd. (TBI), founded in January 1999, is the first listed company in China’s media industry, which came into capital market. TBI’s successful initial public offering (IPO) and rapid capital expansion played an exemplary role in capital operation and Management of China’s media industry. Meanwhile, in the post-IPO period, TBI employed many experts of capital operation and financial Management and brought into full play the various financing approaches, which were characteristic of corporate financing.The capital Management is the core of financial management and financing is the basis of capital management. The thesis firstly introduces the main concepts related to financing and analyzes the Basic characteristics of listed companies. Secondly, based upon the analysis of TBI’s financing environments (i.e. Economic environment, legal environment, financial environment and media industrial environments), the thesis explores TBI’s strengths and weaknesses in financing and evaluates the advantages and disadvantages of TBI’s main financing approaches. Thirdly, the thesis elaborates the difficulties and challenges that TBI is facing in its financing and studies TBI’s financing strategy and other financing approaches. Then the thesis, based upon the study of TBI’s financing environments and approaches, makes a brief analysis of the future development of China’s financial market and forecasts the choice of financing approaches of a listed company.Based on the above analysis, the thesis makes a game analysis on the financing environments and financing, concludes that the basis for the choice of financing approaches is the matching of financing amounts with the main business, the micro-computation of capital cost and the optimization of the capital structure. The thesis also stresses the necessity for a listed group company to follow the financing Philosophy of attaching importance to capital accumulation, and points out, in view of the structural conflicts of money stock in China’s financial market, the necessity of innovation in financial instruments by introducing derivative and hybrid financial instruments into Chinese market.The thesis is expected to be of practical significance both to TBI’s follow-up financing and to the financing of other listed companies as well as of policy implication to the development of China’s capital market.


The Analysis on Financing Decision of China MinSheng Banking Corp.,LTD. Issuing Convertible Bonds

On 02/07/2012, in Finance, by rain

【Abstract】 As an exterior method of raising funds, convertible bonds contain the characteristics of stocks, bonds and options. It is a popular method for Enterprise’s raising funds. Convertible funds issued by many corporations could be converted into their common stocks. Therefore, we can take it as a method of deferred stocks.After China’s entry to WTO, China MinSheng Banking Corp, LTD. faced tougher competition from the strong foreign banks and other Chinese banks. How MinSheng will gain its advantage over others and enjoy its fast growth in the process of China’s rapid growth? The most important method is to expand its capital and enlarge its scale of bank’s assets.First of all, after analyzing three exterior methods of raising funds, MinSheng could use the methods between issuing common stocks and convertible bonds. Since the advantages the convertible bonds have, it became the final choice of Minsheng. And then by analyzing its financial vectors, Minsheng convertible bonds are the deferred common stocks. We study its capital cost and the influence on financial indicators. Meanwhile, we also analyze the value of the convertible bonds issued by China MinSheng Banking Corp, LTD.The final conclusion is that although its capital cost will be high if the convertible bonds are converted into stocks in advance, however, the convertible bonds is the best choice of Minsheng Banking. Minsheng Banking will benefit a lot from the issue.


Research on Capital Structure of Listed Corporation in China

On 25/06/2012, in Management, by rain

【Abstract】 Capital structure influences corporate governance and Enterprise behavior, which is a centralized reflection of interest group’s rights, and rational capital structure conduces to realize maximum of Enterprise value and minimum of capital cost. Therefore, capital structure and its optimization are important contents on theoretics and practice of corporate financial Management.In this paper, theoretics of capital structure is reviewed and expanded, including four phases, and it is compactly reviewed. On this foundation, two modes of the corporate financing are summarized from dynamic view, instead of the whilom static analysis of international comparison. Corporation should finance firstly by the radical mode in china. Academic forshadowing are made for research on capital structure of china listed corporations. Secondly, we make two demonstration researches to listed corporation tight around capital structure theoretics. On the one hand, we study relation of capital cost, capital structure and Enterprise size by new section data in steel industries and IT industries. It is shown empirically that DAR is correlated with capital structure negatively and significance is conspicuous. In the same way, enterprise size is correlated with capital structure negatively, but significance isn’t extraordinarily conspicuous. On the other hand, we establish model on factor affecting capital structure according to characteristics of listed corporation, and macro-factor is taken into account in particular. By principal components analysis and regression estimate, we draw conclusions that enterprise size, volatility, growth and profitability are correlated with DAR affirmatively, holding share capital is correlated with DAR negatively. We embeddedly explain these conclusions from the creditor, the market rule and corporation etc.. Finally, according to the aim of maximum of enterprise value we analyze symptom of capital structure, then some measures are recommended to optimize capital structure from bank reformation, information open and foundation of learning mechanism.


Research on China State-Owned Enterprises’ Capital Strucure Optimization

On 23/06/2012, in Management, by rain

【Abstract】 Capital structure theory is one of chrematistics’s fundamental theories. Chinese enterprises’ development shows their problems both in capital quantity and capital structure. If limited capital can be utilized for structure adjustment, and capital course and utility structure can get constantly optimized, the capital utility efficiency of the enterprises in our country will be successively enhanced. This is conducive to our nation’s Economic development. As the capital structure of Chinese state-owned enterprises come into being under their own special circumstances, this thesis analyses, judges, and absorbs rational elements from western finance capital structure theories through a scientific standpoint and method. This thesis also makes a careful study of the theory of capital structure and Management practices in western countries while taking a stand on socialistic market economy, and comes up with concrete instructive


The Application and Revision of EVA Used in Chinese Stock Market

On 19/06/2012, in Finance, by rain

【Abstract】 Economic Value Added (EVA) is one of measures to evaluate the operational performance of enterprises, which has been paid close attention since 1990s. Because EVA considers the equity capital cost of enterprises, dispels the accountant distortedly and reduces the chance to manipulate the surplus, it can reflect Enterprise’s performance more truly, thus it is widely used in the west. The domestic evaluation on Enterprise’s performance has based on accounting benefit all the time. Because it doesn’t consider the equity capital cost and is easy to be handled artificially, accounting benefit can’t weigh the operational performance of enterprises accurately, thus it receives numerous criticisms. The domestic scholars have carried on a large amount of research on EVA, but the research contents concentrate on introducing and analyzing, they demonstrate the Chinese listed companies. The study on revision of EVA while using in our country is still a blank. Therefore, it is important to study the application and revision of EVA according to the actual conditions of our country.Firstly the paper carries on simple retrospect and introduction to the concept, computing method and application of EVA at home and abroad. Then it analyses the validity and limitation in China’s securities market, puts forward the necessity revised. On this basis, it analyses the content that EVA measures revises from accounting adjustment and cost calculation of capital. It summarizes calculation formula of domestic listed company after defining the content that EVA revises. Finally it researches comparatively on EVA measure after revising, traditional benefit measure and EVA measure not revised in light of the financial data of 100 listed companies, all of this can prove that EVA measure after revising is more valid in weighing the operational performance of listed company.The main conclusions of this paper:1、EVA measure must be revised in the domestic security market, while it is regarded as the Investment analysis tool to weigh the operational performance of enterprises better.2、When EVA is used to evaluate the business performance of listed company as the outside measure, the accounting adjusted items concentrate on five items, such as business reputation、construction in process、deferred tax、reserve fund、non operating revenue and expenditure etc. It is not necessary to carry on the extensive accountant adjustment.3、The suitable model to calculate the equity capital cost is capital asset pricing model (CAPM model) in accordance with availability and reliability of date.4、EVA measure after revising is more valid in weighing the operational performance of listed company.