The IRR Study Of The Reclaimed Water Industry Based On The WACC Combining With Fama-French Three Factors Modes

The shortage of water resources is a global problem, development and utilization of the reclaimed water can effectively relieve the contradiction between the shortage of water resources and people's life and economic development, and it benefits for the sustainable environment development and building-up a conservation-oriented society. But at present, the construction and operation of the reclaimed water project are facing a series of problems, eg. the reclaimed water industry IRR as the important economic evaluation parameter has not be defined yet which makes the financing capability, profitability, solvency etc of the reclaimed water project can't be evaluated properly and objective. This largely hampered the financing and the construction of reclaimed water project.This research is put forward under this situation; the study started from the State Natural Science Foundation Monumental Project-"western drought water resources recycling research. (NO.50138020)", and this research is supported by the Shangxi Soft-science Project-"reclaimed water industry benchmark rate and related economic policy research. (2008KR64)" and Shangxi provincial research projects-"reclaimed water industry IRR of empirical studies (NO.07JK060).The research is focus on the reclaimed water industry IRR, the main research contents and research achievements are the following aspects:(1) The construction of the systematic analysis model to study the reclaimed water industry IRR and the ascertain of the water key factors to study the reclaimed water industry IRR. Based on systematic theory, combined with capital structure theory and capital asset pricing theory, the paper studies the system structure of the reclaimed water industry IRR. And the system structure contains the capital structure factors system, equity capital factors system and debt capital cost factors system. The paper first constructs the systematic analysis model to study the reclaimed water industry IRR and determines the key factors of the research-the capital structure and equity capital returns rate.(2) The reclaimed water industry's capital structure optimization study. The paper uses the influential factors of affecting regeneration methods to analyze the profitability, firm size, tangible assets, taxation, the tax shields, debt equity structure and corporation growth, product uniqueness, liquidity, and puts forward a hypothesis between the eleven factors and the capital structure. With the Pearson correlation coefficient principle of hypothesis variable correlation analysis and multiple linear regression analysis, key factors for optimization of the capital structure of reclaimed water industry was defined as:tangible assets (TANG), the non-debt shields (NDTS), profitability (ROA), capital liquidity (AV), these four aspects in the second variable regression analysis were significantly affecting the capital structure (CS). They are the main factors which could decide capital structure. The influence on the capital structure is aline with the hypothesis conclusion mentioned in the paper. Paper established relationship model between the reclaimed water industry's capital structure and key factors, the relevant financial data of listed companies decide the reclaimed water industry capital structure, and four key elements of reclaimed water value of capital structure optimization value industry are studied.(3) The research and ascertain of equity capital return of the reclaimed water industry was made by using the Fama and French three factors model which stands on two aspects of market and industry. The paper builds the Fama and French three factors model from two aspects of market and industry, explains SMB (size) and HML (value) variable of economic meaning, probes into the market risk, market value and the market scale to adopt the reclaimed water industry from three aspects, and modifies the "size" factor combining with the applicability of the model to the reclaimed water industry status, after these research the paper first constructs the new model form two aspects of market and industry and considering the SMB (size) amended. The paper uses the transaction data of listed companies', Shanghai stock exchange market and the Shenzhen stock exchange market to construct the data combination and the three factors of the reclaimed water industry, three factors of data analysis shows that three factors don't exist relationship, and the empirical study of the equity capital return is based on the open market data and the model of the reclaimed water industry.(4) Typical project simulation test and the determination of reclaimed water industry IRR values. Based on the financial data of Beijing Gaopeidian reusing wastewater treatment project and Beijing Jiuxianqiao reclaimed water project, combining with development situation of the reclaimed water industry, the paper determines the basic financial data of simulation project, through the preparation of financial statements and financial analysis of simulation project, the paper gets the IRR rate of simulation project and the research results was verified by the project simulation test. At the same time, the paper compared the two research results in two different ways and finally affirms the reasonable values of the IRR of the reclaimed water industry.