Cost of capital
The concept of cost of capital. Composition and structure, model of cost. Cost of treasury shares. The problems of capital in the economy. Socially necessary labor costs and real costs of production. Contents of value and the limits of value relations.
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cost capital labor production
Chapter 1) The main objectives
1.1 The concept of cost of capital
1.2 Composition and structure of capital
1.3 Model of cost of capital (WACC)
Chapter 2) Analysis and assessment of cost of capital
2. 1 Analysis of the cost of treasury shares
2. 2 Features of the capital assessment
Chapter3) The problems of capital in the economy
3. 1 Socially necessary labor costs and real costs of production
3. 2 Contents of value and the limits of value relations
In my work I try to consider one of the pressing problems of financial management - the formation of a rational structure of the sources of the enterprise in order to finance the necessary amount of costs andensure the desired level of income. The optimal capital structureinvolves a combination of equity and debt, which provides the maximum market valuation of capital. Search this correlation - a problem solved by the theory of capital structure. The theory of capital structure based on a comparison of the costs of raising equity and debt, and the analysis of the combined effect of different financing options on the market valuation. Currentmarket value (an asset of the project or the entire business) is defined as the sum of discounted net flows generated by the investment.
The main problem that arises in the determination of optimal capital structure is the need to incorporate a large number of factors that may affect the optimality (efficiency) of such a structure. An internal review of the capital structure associated with the assessment of alternative options for financing the activities of the enterprise. The major selection criteria are the conditions forborrowing, their "price", the degree of risk and possible directions for use. The theory of capital structure based on a comparison of the costs of raising equity and debt, and the analysis of the combined effect of different financing options on the market valuation. Lack of development of capital markets, gaps in the training offinancial managers in many companies resulted in little attention todomestic firms capital structure. However, the situation is changing rapidly: the macroeconomic environment improves, which managed to achieve sustained growth,becoming aware of the need to consider the potential contributionof funding decisions to the achievement of business value growth. Currently, the most worthy goal of "intelligent" business is considered to increase shareholder value, which is justified from a legal and moral points of view, since it is the shareholders are the legal owners of the company. The cost of capital increases with the shareholders of the company paying them higher dividends increase shareholder value and purpose of cash payments.
Chapter 1) The main objectives
1. 1 The concept of cost of capital
The concept of "cost of capital. An analysis of capital structure. The grouping of the sources of funds by the size and shape of the cost for their use. The cost maintenance costs of debt, the cost of preferred stock, the value of ordinary shares, CAPM approach, a method that uses a risk premium, the method of discounted cash flow. As you know, the capital of the enterprise, any form of ownership and activity on the sources of the formation is divided into its own and debt . The components of equity are: the share capital in the case of joint stock companies - equity and retained earnings. Debt capital is formed from bank loans and issued bonds. Under the capital structure to understand the ratio of debt to equityof the firm. Under the values ??of equity and debt often understand the value of the account balance of the right side of the balance sheet. This "balance" approach to capital structure is the traditional home of the majority of economists and upravlyayushih. Data from the liability balance is used in the methods of the theory of financial analysis to determine the rates the company's solvency. This line of research capital of the company worked out theoretically deep enough in the domestic economic science, and has found wide practical use in the methods.
However, along with the above approach, there is another line of analysis of capital, which is an integral and essential part of modern finance theory. This area is associated with a theoretical study of the capital structure of firms and the search for the optimal ratio of debt to equity.
Methods for analyzing the capital structure is still little known domestic experts. Recently there was quite a bit of work, which would set forth the provisions of the modern theory of capital structure analysis. At the same time, the lack of such publications, and publications is the lack of examples that show the utility of the theory. Meanwhile, capital structure is not the abstract, divorced from reality, the subject of study, and the most important concept that is used in the methods of determining the optimal method of financing of investment programs, calculating the economic efficiency of investment projects, forecasting stock prices, cost of capital estimate of firm, etc. Almost any task of money management firms associated with the methodology of the analysis of capital structure. The main concepts of modern finance theory are the price and cost of capital. It should be noted that the following definitions andtheoretical concepts are applicable to companies organized in the form of open joint-stock companies. At the cost of equity capital firm called the product of the market price of shares on the number of shares outstanding:
E = S * Ns,
where: E - cost of equity capital firm; S - the market price of one share of the company; Ns - number of shares of the company to use.
D = B * Nb,
where: D - the price the firm's debt; B - 1st price of bonds issued by the company; Nb - number of bonds in circulation. The bulk of the debt of public corporationsaccount for bank loans. Therefore, the cost of debt can be considered the carrying value of liabilities to the bank on loans. The overall cost of the firm is called the sum of price equity and debt:
T = E + D,
where: T - the total market value of the firm.
Coefficient is the ratio of capital structure:
x = D / T,
In addition to the price of each characteristic is the cost of capital(cost). Cost of debt is the interest rate on interest payable by the bank for the loan. In the case of bonds the cost of debt is the rate of return bonds (other than the coupon rate). In general, the rate of return on bonds is found by solving the corresponding transcendental equation. Let us assume that corporate debt consists of perpetualbonds and bank loans, while the cost of debt is equal to:
kd = l / D,
where: kd - the value of the firm's debt; I - the value of the annualinterest on the debt service.
The cost of equity capital is an analogue of the interest rate on interest income or dividends to holders of shares of the company. The cost of equity capital firms, by definition, equal to:
ke = DIV / E,
where: ke - the cost of equity capital firm; DIV-value of dividends paidto shareholders. The cost of equity capital can also be defined as the expected valueof income (dividends) on a rub. market price of shares. To determinethe median income for 1rub. market price of capital, including equity and debt cost of capital, it is necessary to find a weighted average of the values ??of each type of capital, :
ka = kd * D / T + ke * E / T.
The index is called ka average cost of capital of the company. The concept of the average cost of capital is one of the most important in modern finance theory. If it is assumed that all profits after corporation tax on profits will be paid to shareholders as dividends on shares, then:
DIV = (1 - r) * P,
where: P - the value of corporate profits; r - income tax rate.
The total income of the owners of capital the firm will consist of dividends and interest paid to holders of debt obligations:
X = DIV + l = (1 - r) * P + l,
where: X - the total income of the owners of capital the firm. In addition to interest and dividend income source are the owners of capital the firm changes the price of the shares or debt of the firm. If and - values are negative, then in this case they represent a loss of equity holders.
The main purpose of managing the firm in a capitalist economy is to maximize wealth (income) of the owners of capital. There exists an increase of two sources of wealth holders of the capital of the company:
1) maximizing the annual profit X;
2) to maximize the price of a firm's capital E and D.
At first glance, the requirement of maximizing profit is equivalent to maximizing the value of X. However, the problem lies in the fact that X is a random value.
The random variable X is described by the applicable law of distribution F (X) and has the characteristics: the expectation of X and the variance of Dx. If we denote by X the expectation of the total income after tax, then using can be represented as follows:Or As can be seen from equation the maximization of the market price of capital is equivalent to minimizing the exponent ka - the average cost of capital. Thus, to minimize the average cost of capital follows directly from the criterion of efficient management of the firm.
The minimum average cost of capital is optimal, and capital structure, corresponding to the optimal average cost of capital - an optimal capital structure of the firm. Currently, two trends emerged in the theory of capital structure: the traditional approach and the so-called. The traditional concept of capital structure is distinguished by clarity and simplicity of the theoretical assumptions, as well as the rational consistency of the final conclusions. The disadvantage of the traditional approach is the weak theoretical base, which makes the theory of weakly argued in comparison with alternative kotseptsiey Modigliani and Miller.
The traditional theory of capital structure analysis and the theory of MM, in spite of the difference between the initial positions and final conclusions are based on current pricing theory of capital CAPM (capital asset pricing model). According to the CAPM theory of value (rate of return) of any capital can be represented as follows:
R = Rf + Rp, (11)
where: R - value (rate of return on capital); Rf - the cost of risk-free asset;
As the cost of risk-free asset is usually taken to the state rate of return on short-term debt obligations. The risk premium associated with the inherent uncertainty in the market economy in the magnitude of the result of financial and economic activity, ieuncertainty of the value of income received. The risk of investment in the production company is divided into operational and financial risks. Operational risk is associated with the uncertainty of the volume of sales of the company. In turn, the financial risk caused by the availability of borrowed funds in liabilities of the firm and is associated with fluctuations in income earned before interest and tax. It is obvious that with the growth of debt obligations of the firm increases the risk of insolvency and, consequently, will increase the cost of debt and equity. This will be reflected in the growing importance of the risk premium, ie value. In addition to separating the components of risk for reasons of separation, there is also the risk of systematic and unsystematic risk, to:
Rp = Rs + Rn, (12)
where: Rs - premium for systematic risk; Rn - premium for unsystematic risk.
By definition, the systematic risk is not eliminated by diversification of the portfolio, so risk is nediversifitsiruemym. Diversification of the portfolio implies that capital is made up of several components. In the case of a manufacturing firm assets are capital assets will be presented for the production of various commodities. Each asset or type of production, in addition to systematic and unsystematic risk inherent in, or the risk that can be eliminated through diversification of products. The higher the degree of diversification, or set of goods and services produced, the smaller the impact of unsystematic risk. At a sufficiently high degree of diversification of unsystematic risk can be ignored. Unsystematic risk is also called the risk of a diversified.
Nediversifitsiruemy (systematic) risk arises from the dependence of rate of return on capital firm on the movement of the market as a whole. Numerically, this translates into a positive correlation rate of return stocks and the average rate of return of all shares on the market. The rate of return determined by averaging the rates of return on all stocks traded on the stock market, shares, called the rate of return "average stock" or rate of return on market portfolio. [see 5]
1. 2 Composition and structure of capital
Fixed capital includes fixed assets, as well as the pending long-term investments, intangible assets and new long-term financial investments.
Fixed assets leased with the right to buy or rent at the end of thecontract, passing into the ownership of the lessee are accounted for as well as their own assets. The capital also includes the cost of unfinished capital investments in fixed assets and the purchase of equipment. This part of the cost of acquisition and construction of fixed assets, which has not yet become a major money can not participate in economic activity, and therefore should not be subject to depreciation. In the capital, these costs are included for the reason that they have withdrawn from working capital. Long-term financial investments represent the cost of equity in the share capital in other enterprises, for the purchase of stocks and bonds for long-term basis. The financial investments also include:Long-term loans to another entity under the debentures;
the cost of the property transferred to the long-term lease on the right financial leasing (ie, redemption or transfer of ownership of the property after the expiration of the lease term). Fixed assets - is money invested in a set of real values of material relating to the means of labor. Fixed assets and long-term investments in fixed assets have a multi-faceted and multi-faceted impact of the financial condition and results of operations.
One of the most important prerequisites for effective capital management is to assess its value. The cost of capital is the price the company pays for his involvement in a variety of sources. Such an assessment of capital comes from the fact that capital has a cost, which forms the level of operating and investment costs of the enterprise.
The main source of financing is equity. It is composed of share capital, the accumulated capital (reserve and additional capital, the accumulation fund, retained earnings) and other income (targeted funding, charitable donations, etc. )Share capital - a sum of money for the founders of the authorized activity. Additional paid in capital as a source of funds of the company formed by the revaluation of property or the sale of shares above.
By means of a special purpose and special financing are obtained free of value from individuals and legal entities, as well as irreversible and recurrent budget allocations for the maintenance of community facilities and to restore the solvency of the enterprises which are financed from the budget.
Capital structure - the proportion of stocks, bonds, assets that make up the company's capital, in other words, the ratio of debt to equity. Category, reflecting-mental impact of this factor on the amount of net income, is fin. lever. This dependence is based on the postulate that the cost of capital depends on its structure.
Managing capital structure - the process of determining the ratio of debt to equity, which provided the optimum ratio between the level of return on equity and the level of Fin. stability, ie market is maximized.
Capital structure is the ratio between equity and debt, drops the crowbar and harakteriz. stepen risk Finnish investing new resources in this predpriyatie. Nodolzhna to rise and yield sobstv. kapitala.
Suschestv. 2 osnovn. podhoda (theory), optimization of capital structure-ry:1. Traditsionny (it is believed that the stand-Th kap. firmy depends on its structure). Suschestv. optimaln. struk-ra-la cap minimizes the value of WACC (stand-Th-La and avansirovan. kap sledovat, but maximizes the market.
Reader-optimal Mr. Xia page, when the proportion of debt is 30 to 50%. 2. Theory modelyane-millera. Oni believe that under certain conditions, stand firm and Th-Th stand cap-la does not depend on its structure-ry, and traces of n can not be optimized, and you can not build rynochn. stoim Th firms due to changes in cap structure-la. Rynochnaya value is determined by the capitalization of its operating profit at the rate appropriate to the class of risk to the company.
In analyzing the equity issue is of great importance for assessing its value. Estimating the cost of equity capital makes it possible to obtain additional information to make appropriate management decisions of the current and long-term plan, to determine the effectiveness of the company. In practice, there are several ways to determine the cost of equity capital. Each of them has both positives and some drawbacks.
The first way - the definition of accounting (book) value of equity of the enterprise. According to this method, all assets and liabilities are recorded on its balance sheet at cost or origination. Equity is the difference between the carrying amounts of assets and liabilities. This method of evaluation is acceptable only when the carrying and market value of assets and liabilities are not very different among themselves. If the market value for one reason or another substantially deviates from the original book value, then this method leads to a distortion of results, the inadequacy of the equity. This method is simple, requires no special training for workers and the significant costs of the assessment.
The second way - a way to market value - is that the assets and liabilities are measured at fair value, which is calculated on the basis of equity. This method more accurately reflects the real level of protection for the enterprise, enables a more dynamic and realistic assessment of the cost of equity capital because the market value of assets and liabilities is constantly changing. However, companies do not usually interested in this method of determining the cost of equity capital, especially when it does not help strengthen the position of the enterprise market. This method is commonly used for internal management purposes, although it is useful to external users. Note that the image of the market value of certain inherent disadvantages. First, it is not always appropriate and can be estimated correctly the assets and liabilities at market value. Secondly, this type of time-consuming, require highly skilled professionals, as well as significant expense. Compromise models based on the addition to the model of Modigliani - Miller and Miller's account of expected costs of financial distress and agency costs, have received a confirmation of the practice and allow the following conclusions. A. High-risk enterprises, return on capital which varies considerably, it is necessary to attract debt capital at a lower scale than low risk. Companies with low risk may be more actively involved in borrowing as long as the expected costs of possible financial difficulties does not override the tax benefits associated with raising funds.
Two. Companies that own the material, realizuemymina market assets such as real estate may involve borrowing more than the company, whose value is determined mainly by intangible assets such as patents, the more the asset, human capital, as in the case of financial difficulties.
Three. Companies paying, high taxes on income, with no tax benefits and can afford more payable than companies with low tax rates on profits. 4. Every company must maintain a target capital structure, which allows you to balance the costs and benefits of financial leverage, because it is such a structure maximizes the value of the company. Five. Enterprises of one branch, similar to scope of activities have similar capital structures are determined by approximately the same type of assets, production risk and return. Modigliani F. , Miller M.
Research practices in the formation of the capital structure of U. S. corporations, conducted in the 60s of XX century. , G. Donaldson led to the following conclusions:
1) companies prefer to be funded from internal reserves of retained earnings, depreciation and amortization;
2), the company set a target value of the coefficient of dividend payment, so that the retained earnings and depreciation charges were sufficient to finance the necessary investment;
3) The dividends are stable in the short term, so in any given year based on actual cash flows and investment opportunities of the company may or may not have sufficient internal resources to cover their capital costs;
4) If the company generated cash flow is more than necessary for the purposes of expansion, then it will invest available funds in the securities market or use them to repay the debt, otherwise the company will first sell its portfolio of marketable securities, and then- involving conventional loans by issuing convertible debentures and only in extreme cases, common stock.
Thus, in practice, decisions about capital structure differ significantly from the trade-offs arising from the models. In 1984 S. Myers articulated position, now known as the theory of asymmetric information, which can explain the differences between the capital structure, which is observed in practice, the structure determined by the compromise model. The theory assumes that the various groups and market actors may have an asymmetric, ievarious information on the status of the company at different times, but because of their different assessments of the situation. Gerchikova IN Management: Workshop / IN Gerchikova. - M. : Banks and markets: UNITY, 2003. - S. 208The theory of asymmetric information leads to the following conclusions. Enterprises need to issue new shares only if:1) if they have an exceptionally profitable projects that can not be delayed, or financed by loan capital;2) if managers assume that stocks are too high in price. Investors who are aware of the asymmetry of information, tend to lower prices for shares of companies when they announce their intention to issue new shares. The residual financing scheme, revealed by Donaldson, justified in terms of the existence of asymmetricinformation, it allows you to reinvest a large portion of the profits, maintain a high proportion of equity and low debt, thereby maintaining a certain "reserve borrowing capacity. " The global financial crisis of the late 90s of XX century. confirmed this situation: many of the countries of South-East Asia in the capital which has traditionally been a high proportion of borrowed funds during the crisis hit the hardest. Basovskii L. Financial Management / L. Basovskii. - Moscow: INFRA-M, 2005. - P. 94Compromise model of Modigliani - Miller, Miller, and their followers can identify the specific revenues and expenses arising from the use of borrowed funds: tax effects, the costs associated with financial difficulties. The theory of asymmetric information makes it possible to predict the possible benefit of maintaining a higher proportion of share capital and a lower level compared to the optimal values ??determined on the basis of models of Modigliani - Miller, Miller and their followers. It is impossible to determine the optimal capital structure, if not complete quantitative analysis of expert estimates. It is necessary to take into account various factors, and in some cases one factor may be significant, whereas the role of another factor may be small. Consider the most important factors to be considered for peer review.
The long-term viability. Managers of companies that provide vital services such as power, transportation, communications and are responsible for ensuring the continuous operation of enterprises, so they must refrain from the use of debt financing to the extent that it endangers the long-term viability of the enterprise. The long-term viability may have priority over the maximization of share price and minimizing the cost of capital. The interests of managers. Investors typically have a high degree of diversification of their portfolios. Therefore, an investor can avoid the possibility of some financial difficulties as a loss on some stocks is likely to be offset by the windfall profits on other stocks within its portfolio. Managers tend to fear the possibility of financial difficulties because of their career, and consequently the present value of future earnings could be seriously affected in the event of financial difficulties at the plant. Therefore, managers may be more conservative and cautious in the use of debt financing than we would like shareholders. Typically, managers, although they are not recognized in this plan to the capital structure is somewhat worse one that maximizes the expected stock price. Stoyanov ESFinancial Management / HH Stoyanova. - 4th ed. , Revised. and add. - M. Ed. -in "Perspective", 1999 - p. 104
The attitude of creditors and rating agencies. Often a significant impact on the capital structure of companies have banks and rating agencies, as the company discussed its financial structure to them, their findings are of great importance for companies. Even if the management company so confident in their prospects, which seeks to use debt financing in excess of industry norms, its creditors can not agree to such an increase in borrowed capital.
Coverage ratios are often used by banks when calculating the risk of financial difficulties. Usually, managers of enterprises attach great importance to this factor cover, as a ratio of interest expense (Times-Interest-Earned - TIE). This ratio shows how many times the income exceeds the interest payments, so the smaller the ratio, the more likely that the company will face financial difficulties. Another coverage ratio, which is often used by banks and rating agencies - a coverage ratio of permanent financing costs (Fixed Charge Coverage - FCC). He, unlike the coefficient of T1E, considers that, apart from interest payments, there are other permanent financing costs, which can lead to financial difficulties. Reserve borrowing capacity. Conditions of loan agreements entered into by companies, usually stipulate that the new loan can not be obtained if certain factors do not exceed the minimum level. Very often in this regard is regulated minimally acceptable value of TIE (for example, not less than 2. 0 or 2. 5). Thus, if a company sets a high target share of borrowed capital, its reduced financial flexibility - it can not count on the continued use of the new debt. If the management company has a small stake, controls only a small majority of votes of the shareholders for the new funding can be selected by borrowing. In contrast, a group of managers who are not interested in controlling the votes, may decide to use equity rather than debt, if the financial position of the company is so weak that the attraction of debt can cause a threat to non-company obligations. When a company is experiencing serious difficulties, creditors can take firm control and change management. But the use of debt capital is too small leads to a low stock price, and then there is a risk of buying shares by new investors, which can also change the leadership. In general, if the company's management does not control a majority of votes, the impact of capital structure on the problem of control, of course, be taken into account. The structure of the assets. Companies whose assets may serve as collateral for loans, tend to be more intense fund-raising. Conversely, if the assets are high-risk, the enterprise has less scope for borrowing.
The pace of growth. Companies interested in the rapid growth must actively use external financing: the slow growth can be financed through retained earnings, but the rapid growth requires the use of external sources. Because the costs of public offering higher compared with the placement of loans, to the extent the company, faced with the need of external financing in the first place have recourse to borrowing. This leads to the fact that fast-growing companies are more inclined to use debt capital than slow-growing. Profitability. Often companies with very high returns on invested capital prefer to limit their own power. Often, highly profitable companies simply do not need a lot of debt financing - their high yield provides the possibility of financing through retained earnings. Taxes. Interest payments reduce taxable income, so the higher income tax rate, the more profitable for companies to use debt financing. To solve the problem of determining the target capital structure is usually used a computer model that allows you to check the results of changes in capital structure. Can also be used by special programs such models, and this model can be created in an environment of spreadsheets MS Excel. The model generates a forecast figures based on the input data entered by the financial manager. Each parameter can be either fixed, or changed over the years. Initial data for the simulation include the most recent reporting balance sheet and profit and loss account, as well as following the expected or installed in accordance with the strategy of management variables:
1) The annual growth in sales volume in physical units;
2) the rate of inflation;
3) The income tax rate;
4) the variable costs as a percentage of revenue;
5) the fixed costs;
6) The interest rate on loans already received;
7) the limiting values of the prices of different types of capital;
8) the capital structure in percentages;
9) the growth rate of dividends;
10) dividend payout ratio over the long term.
At the beginning of the simulation introduces the basic values and the expected annual growth in sales volume in physical terms, the inflation rate and other data. They are used in the model to predict the operating profits and assets that do not depend on the structure of financing. In addition, it is necessary to consider the terms of financing, namely the ratio of debt and equity, the composition of debt capital - the ratio of short-and long-term loans. After that, the financial manager as much as possible assessing the impact of the capital structure on the price of its components. [ see 1]
1. 3 Economic sense and uses (WACC)
Economic meaning and uses of indicators' average cost of capital "and" marginal cost of capital "The term weighted average cost of capital (WACC) is used in financial economics to measure the cost of capital. This indicator is widely used by many enterprises as the discount rate for the funded projects, because the current cost of capital is a reasonable indicator of the "cost" of capital. A corporation can raise funds from two sources: equity capital and borrowed funds. Equity capital is divided into two categories: ordinary shares and preference shares. WACC takes into account the relative weight of each component and the expected cost of capital for the company. The average cost of capital can be calculated as: Where: As measured by the expected cost of a new (or attracted) capital, it is necessary to use market valuation of each of the components, rather than data from financial statements (which may vary significantly). Additionally, other more rare sources of financing, such as convertible bonds, convertible preferred shares, and the rest will be included in the formula only if they are present in significant amounts, since the cost of such financing is usually different from the standard bonds and shares. Under normal conditions, the formation of the capital budget is essentially a classic application of the following economic principles: the firm should expand as long as its marginal revenue becomes equal to its marginal cost. In the case of formation of the capital budget the income limit is understood as the profitability of the project, taking into account risk, and marginal cost - as the marginal cost of capital of the company. It is assumed that the company has five independent equally risky project with a total investment required Ј 23 million. Price of capital assumed to be constant and equal to 10%. If IRR> 10%, the NPV is positive. This, projects, V, W and X have NPV> 0, should be taken, and Y, and Z projects have NPV <0, and they should be rejected, as their IRR <k The optimal size of investments - 14 000 rubles. This solution maximizes the value of the firm and the cumulative wealth of its shareholders. Managers should pay great attention to the compilation of forward-looking options for financial reporting and learning how they affect the behavior of alternative strategies. Analysis of these effects is a key part of financial planning.
[ see 3]
Chapter 2) Analysis and assessment of cost of capital
2. 1 Analysis of the cost of treasury shares
A shareholder may examine the company not only as a source of dividends, but also as a property belonging to it in the form of shares of the company, which he can sell at a price exceeding the price of their purchase. To determine the value of the company from the perspective of a potential buyer of its stock, must be considered:
- The market value of the shares of the company;
- Book value of net assets (assets minus liabilities);
- The structure of assets and liabilities of the company;
- Net profit for the reporting period;
- Dividends paid;
- The effectiveness of the company;
- The company's image in the market, etc.
Combination of all these factors, expressed in monetary terms, the value of the company may be called in the broad sense of the word. For various companies (people) have a different priority factors. Consequently, depending on which of them preferred to be changing assessment of the company. In addition, the option value can be a lot of (market value, book value, etc. ). Upon the sale of the company for its evaluation will be used by one of these values ??(or combination thereof), but if the shareholder is not going to sell anything, for the analysis of the changes it will be useful to estimate, based on changes in the value of the company for a certain period, rather than its static value . To estimate the value of a company, you can use two approaches:
1) based on the profit according to the accounting records;
2) the actual and forecast data on flows of funds.
The first thing that can be used to estimate the value of the company - is its financial statements according to which its capital ("historical" value of the share in the assets of the shareholders of the company) is equal to the difference between the carrying amounts of assets and liabilities.
[ see 2]
2. 2 Features of the capital assessment
Estimating the cost of capital is one of the keys to managing the company and its capital at a high level of efficiency. The cost of capital - is the price the company pays to attract capital from various sources. The point is that capital has a cost, which forms a level of investment and operating costs of the company. For a competent assessment of capital necessary to take into account the key areas of operation of its value in the company. First, the price of capital is a measure of profitability of the company operating plan. Second, the cost of capital rate is used as a criterion in conducting investment, both real and financial. In addition, the cost of capital is a measure of managerial decision-making plan. As we see, to overestimate the importance of evaluating the cost of capital is not possible because of the huge importance of this operation. Capital appreciation is based on certain principles, which include the principle of piecemeal assessment, and generalizing the principle of assessment. The principle of piecemeal assessment of the cost of capital. Due to the fact that capital, which is used by the company, is a complex heterogeneous components, the evaluation should be expanded to all the elements into separate parts. And each of them will be evaluated.
The principle of piecemeal assessment of the cost of capital is carried out on such methods:
- Method of comparability of debt and equity;
- Method of dynamic assessment;
- Method of providing for the interdependence of upcoming and ongoing cost (weighted average);
- A method of establishing the boundaries of attracted additional capital.
The principle which generalizes the estimates of capital. In fact, a preliminary assessment - this is only a prerequisite forgeneralizing estimates the cost of capital, which is a measure of the cost of capital in its average values. In order to ensure the correctness and comparability calculationsweighted average cost of capital, it is necessary that the sum of itspart of the market has been expressed in present value. For more information about the service assessment of capital you can find out by calling our office or visit him in person, where all yourquestions will be qualified answers. Capital is characterized by multiple definitions as broad and fairly narrow profile. Traditionally, the capital of conventionally divided into working and basic, but in areas of its operation - the loan (finance), commercial and industrial (production). Naturally, a qualified specialist to assess the cost of capital always takes into account these nuances. In addition, when assessing the capital necessary to consider that the main component of any capital assets are capital at the disposal of a particular company or organization. In assessing the cost of capital, an experienced appraiser understands that the cost of goods has a larger working capital contribution, which is quite natural, because it turns fast. It should be considered when assessing the capital and its depreciation characteristics, which are the moral and physical deterioration of capital. Reflecting the process of depreciation write-off of the fund is a percentage of depreciation of fixed assets. Contributions to this fund - it's production costs, and such costs are not taxed, in some cases, it is very important for the company. Pay attention to the fact that the depreciation of money from the fund are used exclusively to finance investments in capital. In assessing capital appraiser uses many of the basic parameters - the coefficients of capital, return on assets, depreciation, renovation of fixed assets, liquidity, working capital, its metal, energy, material and so on. [see 2]
Chapter 3) The problems cost the economy
3. 1 Socially necessary labor costs and real costs of production
Now we know that the value of the goods is not determined by the value embodied in it an abstract work in a physiological sense. Consequently, the cost of abstract labor in its social content indicate the mobility of this substance and is not associated with the production of a single product or the entire mass of a given type of goods, and the totality of goods and services produced and delivered to the market. Of course, every single item is not nothing but a bunch of labor embodied in it. However, the physiological aspect of the work does not indicate the amount of costs and, most importantly, the social significance of labor input, but only in the total labor nature, a common source of origin of goods and services. Moreover, the labor costs can not be directly measured and not amenable to calculation of individual benefits. The social nature of the labor cost of substance begins to appear only at the stage of exchange, because only in him, in the act of sale reveals two important things: recognition of the need, the need for this product and the recognition of public interest expended on its production resources, reduced to abstract labor. In other words, since both directly manifested in the price, which faced the interests of buyers and sellers, but if the part of sellers is to identify the magnitude and importance of the efforts expended on the production of goods, ie socially necessary expenditures of labor, on the part of buyers - the definition of values, the social significance of the goods offered, which is manifested in the willingness to pay for the goods is quite certain price, containing the substance of labor in monetary terms. Thus, we can say that values are manifested on the one hand, the socially necessary labor, on the other - the usefulness of manufactured goods to the buyer. Therefore, the value of the goods appears mediating link between essence and appearance, value and price. The act of buying indicates the value to society as the product itself in its natural form, and the society of labor expended on its production. Pay attention to the value of labor society, rather than individual commodity producer. This is the essence of labor costs is not physiological, and social sense as a "messenger", "joint" labor redistributed between the total mass produced commodity products through the market mechanism of supply and demand. If this interpretation of the essential and yavlencheskoy sides of commodity production will become clear correlation value, value, price and the fact that the price is finally formed by supply and demand, which deal with the existing value. The degree of deviation of prices, "detached" from the value determined by agreement or law, compliance with the distribution of the total social cost of labor (resources) and the structure of the total volume of social needs. This fundamental position of the labor theory of value, which is reflected and the cost and value and price, can serve as a starting point for comparing the theory with other theoretical developments. In this respect, noteworthy utility theory in opposition to the labor theory of value, which was nominated for the position of alternative production possibilities, of which, in turn, followed the definition of the real costs of production. Under this provision, the actual cost of production of a product are the highest utility of the benefits that society could receive if in a different way were spent on the distribution of output production resources. A comparison of the situation with the situation on the labor theory of value according to labor needs of the society it indicates their intimacy. But in the theory of utility production costs are considered in terms of their usefulness, which is not alien to the labor theory. First, as we already know, the utility of wealth is determined by the needs of their degree of saturation. This is manifested in that, and in the other theory value, the social significance of the benefits from the perspective of the buyer. Second, ONZT and actual costs indicate a deviation actually carried out in the first case of total labor costs in the second case - the production resources from that of their structure that best satisfy the needs of all segments of society (in the first case), would provideoffers the highest utility of wealth (in the second case). Third, pay attention to the fact that buyers and subjective judgments about the value of goods (although we already know that this is a subjective J. Clark transformed into a social judgment obektivatsionnoe limiting class of customers), and recognition by society socially necessary (by adding a useful) the cost of labor in the labor theory of value actually point to the same media public interest in a commodity industry, consumers - in a market economy. It is their opinion, expressed in the cost of buying points to the usefulness, value to society produced goods (social use-value) and spent on a production resources, or labor (here we refer the reader to the already discussed above aspect of the "reduction" of material resources to work) . Fourth, if the society were made good in full compliance with the volume and structure of its needs (the most useful benefits), then ONZT (actual cost of production) would be fully expressed in the price, ie value and price to match. Society at the same time would have reached the highest economic efficiency of utilization of available production resources and greatest usefulness manufactured goods. Fifth and finally, as a rule, the prices of goods in most cases deviate from ONZT (value), the actual production costs. However, within the labor theory of value, this deviation ONZT (value) is calculated from the price is acceptable only if the physiological interpretation of cost of labor, while their social content indicates that the price for the cost of moving, and they are always the same as the corrective component of the total redistribution Cost of labor is valuable as an expression of social use value, ie use value, not as the natural properties of things, but as a social value, usefulness to society of this thing. The product may have a natural ability to meet a particular need, but do not buy it, it does not become a commodity, and therefore, useless to society is recognized at the requested level of prices. Its reduction can transform this natural use-value to the public, ie socially meaningful for society. Thus, at the same time the price will be expressed by the actual value of the benefits of his labor substantial importance. Further development of the marginalist theory of marginal utility by supplementing the marginal cost, marginal productivity, marginal returns suggests that the theory of utility has been forced to resort to it, any way to reveal the content side and the demand price and the offer price. Therefore, in contrast to the monistic conception of the labor cost of marginalism stood in front of the need to adopt a pluralistic concept of pricing, however, when the pressures as part of the utility. As for the theory of supply and demand, it never at any stage of its development has not been able to reveal the content side of the price, but coped brilliantly and manages within economics and political economy with characteristic yavlencheskoy prices. However, outside the laws of supply and demand of any theory remains incomplete and inconsistent, because they are "tangible", visible on the surface of market relations and, therefore, is a question of identifying the principles of interaction between the real agents of these relations. Reveal the essential foundations of economic relations and tried to classical political economy. Economics is focused on the visible part of the relationship, focusing on the solution of practical problems have arisen to identify the behavioral aspects of business entities, rejecting the "cost" and the whole system of value relations. In conclusion, I would caution against far-reaching conclusions from just generalizations made in this paper.
First, it is only an attempt to synthesize the various theoretical concepts for understanding their common points. Of course, this is obviously not without its eclectic, but it is also one way of thinking, which may indicate the "exit" to the new paradigm. It is important to synthesize certain isolated analysis of various aspects of exchange-relations. Secondly, the author does not aim to "reconcile" different socially oriented theory. This is unrealistic, since it is only in respect of wages, and then only with great reserve, it is possible to identify their commonality in determining its source - the work. For the remaining income: income (industrial, trade, services), dividends, interest, land rent theory hold irreconcilable positions. Therefore, the above focus was directly on the general categories of cost, value and price in their unity, and not on factors that create value, values, and ensuring the assignment of income as a part of any price, distribution, redistribution, based on relations of ownership and control in their economic content of the property. [see 4]
3. 2 Contents of value and the limits of value relations
Now focus your attention on the value, content of which is labor. Why work? Yes, because all of the accumulated wealth of the nation in the long run - the result of work in interaction with nature. Determinant is clearly the work. Under the wealth and can be understood and the material and spiritual wealth is likely, in their indissoluble unity and opposites. The fact that increasing material wealth, we can develop intellectually, and spiritually, but you can build, and suppressing, disfiguring a person's soul, its relation to itself, the surrounding world, nature. As for the capital (real), then virtually all economic schools recognize its economic, ie, derived from activities in nature. We specify the derivative of the work. Capital can be thought of as the past, materialized labor, but it interacts with living labor, and, therefore, as a "come alive". During this interaction occurs the productive power of synergy of past and present work. And "come alive" hard to be understood not only embodied labor direct creators of the means of production (capital), but the work of the creators of technology and technology - scientific work, as well as the work of those who formed a new labor force (science, education, culture, health ), could lead to the movement of these means of production. It is in this must see synergies "joint work" is certainly involved in the creation of social value of goods and services. In connection with such a broad interpretation of the scope and sources of value creation drew the attention of the view that they treat the "value" and "economy". In other words, the economy is necessary to refer all that is viewed through the lens of value, only the system of market relations, the rest - uneconomic. The distinction made by our contemporary, prof. JM Osipov, between "economic" and "noneconomic" economy in value criterion, it is very convenient, but far from perfect and in fact reduces to a new interpretation of commercial and subsistence production. But the problem is much more complicated if we consider a single national economic complex, with its "economic" and "non-economic" sectors. We believe that, based on another principle, put forward again, JMOsipov: "value - the category of reproduction," we rightly turn to the relationship value of the so-called "non-economic" sector, guided by the fact that the core of the process of reproduction is the man himself in a variety of relationships of his life. When you combine the "economic" and "non-economic" as part of a whole - the social process of reproduction is no need to declare "transcendent" value of the phenomenon, although it retained its diversity and, in some sense a mystery. But surely it is - all-encompassing category of human existence. The historical development of commodity production in which "non-economic" areas become "economic", points to the universal category of value, especially at the stage when the sphere of intellectual production is impossible to separate from the "economic" process.
In this regard we draw attention to the specifics of work in spirituality, in particular, the scientific production. It does not work only materialized in the manufactured goods, but also "inspires" them, but not after, but before they appear in material form, which only has formed "product idea" if you want it "soul", even when No exchange relations, through which only manifests the price, but its formation has been going on in full swing. And if the market point of view there is "disastrous", unreleased product, it does not mean that there is "a failure" value, ie its absence. Nothing like that. The product is not, and the cost is, because the costs were non-material production, and therefore they can not disappear. The fact that these efforts were nothing more than a diversion of resources from other sectors of the economy, in which they would bring some fruit, useful results. But from a social perspective, this "without result" is the result, and not barren, as he pointed to the falseness of the option chosen, or how good it is received, and prevent the cost of the subsequent stages of its reproduction. Let us qualitatively new developments in the practice of cost categories. Under the substance of value refers to the cost of all the vital forces and the efforts undertaken by the combined employee in the sphere of material production. Now it is obvious that one can not be limited to purely material sphere of production, as the prevailing price in the formation of the social product of the industrialized world is immaterial production. Consequently, the concept of "total employee" even in the value relations is greatly extended. Moreover, from our point of view, not an employee under the combined mean only employees. The concept of "total employee" should be included all the occupied active population, regardless of the scope, type, form and method of work. Therefore, the cost - is primarily the total social work, taken as a unity of its sectoral and territorial aspects. Therefore, the true value of the movement - not from a single product to the public cost, but rather from the social value of individual items. Cost - this is social capital and its reproduction, movement, its cross-sectoral and inter-regional migration and integration. This is the portability of social capital, his movements are responsible for the formation of prices of production as a modification of the cost of goods attached to his social capital. This modification costs, as we know, led to the rapprochement of the supporters of the average profit rate, and average costs derived from different theoretical positions. Interaction of the total social labor and social (aggregate) capital gives the social content of the abstract labor embodied in the value of the goods. From such a functioning labor and capital, their movement and mobility flows of substance as opposed to the physiological value of "fossils" of materialized labor in the product. cost of cost of capital incomeNecessary to depart from the provisions of the expensive cost model. Of course, the basis of the cost is expensive component of the total social labor and capital. But here and its opposite - saving labor, capital and resources. This is the essence of the dialectical unity of opposites, and cost savings. Introduction of a new component, in our opinion, can come to grips with the introduction of the system of management, the economy, "noneconomic" areas and factors.
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