Chapter 13 NotesWord文档格式.docx

Chapter 13 NotesWord文档格式.docx

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Evaluatethekeyaspectsofstockdividends,stocksplits,andstockrepurchases.

TheFirm’sCapitalStructure

⏹Accordingtofinancetheory,firmspossessatargetcapitalstructurethatwillminimizetheircostofcapital.

⏹Unfortunately,theorycannotyetprovidefinancialmanagerswithaspecificmethodologytohelpthemdeterminewhattheirfirm’soptimalcapitalstructuremightbe.

⏹Theoretically,however,afirm’soptimalcapitalstructurewilljustbalancethebenefitsofdebtfinancingagainstitscosts.

⏹Themajorbenefitofdebtfinancingisthetaxshieldprovidedbythefederalgovernmentregardinginterestpayments.

⏹Thecostsofdebtfinancingresultfrom:

♦Theincreasedprobabilityofbankruptcycausedbydebtobligations.

♦Theagencycostsresultingfromlendersmonitoringthefirm’sactions.

♦Thecostsassociatedwiththefirm’smanagershavingmoreinformationaboutthefirm’sprospectsthandoinvestors（asymmetricinformation）.

⏹CapitalStructuresofUnitedStatesandNon-UnitedStatesFirms

♦Ingeneral,non-UnitedStatescompanieshavemuchhigherdebtlevelsthanUnitedStatescompaniesprimarilybecauseUnitedStatescapitalmarketsarerelativelymoredeveloped.

♦Inaddition,inmostEuropeancountriesandJapan,banksaremoreinvolvedbecausetheyarepermittedtomakeequityinvestmentsinnon-financialcorporations—apracticeprohibitedintheUnitedStates.

⏹SimilaritiesbetweenUnitedStatesandforeigncorporationsinclude:

♦Similarityofindustrycapitalstructurepatterns.

♦Similarityoflargecorporationcapitalstructures.

⏹Inaddition,itisexpectedthatdifferencesincapitalstructureswillfurtherdiminishascountriesrelylessonbanksandmoreonsecurityissuance.

TheOptimalCapitalStructure

⏹Ingeneral,itisbelievedthatthemarketvalueofacompanyismaximizedwhenthecostofcapital（thefirm’sdiscountrate）isminimized.

⏹Thevalueofthefirmcanbedefinedalgebraicallyasfollows:

DebtRatiosforSelectedIndustries

EPS-EBITApproachtoCapitalStructure

⏹TheEPS-EBITapproachtocapitalstructureinvolvesselectingthecapitalstructurethatmaximizesEPSovertheexpectedrangeofEBIT.

⏹Usingthisapproach,theemphasisisonmaximizingtheowners’returns（EPS）.

⏹Amajorshortcomingofthisapproachisthefactthatearningsareonlyoneofthedeterminantsofshareholderwealthmaximization.

⏹Thismethoddoesnotexplicitlyconsidertheimpactofrisk.

⏹Example

♦ThecapitalstructureofBuzzCompany,asoftdrinkmanufacturerisshowninthetablebelow.Currently,BuzzCompanyusesonlyequityinitscapitalstructure.Thusthecurrentdebtratiois0.00%.AssumeBuzzCompanyisinthe40%taxbracket.

⏹EPS-EBITcoordinatesforBuzzCompany’scurrentcapitalstructurecanbefoundbyassumingtwoEBITvaluesandcalculatingtheassociatedEPSinthetablebelow.

⏹BuzzCompanyisconsideringalteringitscapitalstructurewhilemaintainingitsoriginal$500,000capitalbaseasshowninthetablebelow.

⏹Thismaybeshowngraphicallyasshownonthefollowingslide.

BasicShortcomingofEPS-EBITAnalysis

⏹AlthoughEPSmaximizationisgenerallygoodforthefirm’sshareholders,thebasicshortcomingofthismethodisthatitdoesnotnecessarymaximizeshareholderwealthbecauseitfailstoconsiderrisk.

⏹Ifshareholdersdidnotrequireriskpremiums（additionalreturn）asthefirmincreaseditsuseofdebt,astrategyfocusingonEPSmaximizationwouldwork.

⏹Unfortunately,thisisnotthecase.

ChoosingtheOptimalCapitalStructure

⏹Thefollowingdiscussionwillattempttocreateaframeworkformakingcapitalbudgetingdecisionsthatmaximizesshareholderwealth（i.e.,considersbothriskandreturn）.

⏹Perhapsthebestwaytodemonstratethisisthroughthefollowingexample.

♦AssumethatBuzzCompanyisattemptingtochoosethebestofseveralalternativecapitalstructures—specifically,debtratiosof0,10,20,30,40,50,and60percent.Furthermore,foreachofthesecapitalstructures,thefirmhasestimatedEPS,theCVofEPS,andrequiredreturn.

⏹Ifweassumethatallearningsarepaidoutasdividends,wecanusethezerogrowthvaluationmodel[P0=EPS/ks]toestimatesharevalueasshowninthetablebelow.

OtherImportantConsiderations

DividendFundamentals

⏹CashDividendPaymentProcedures

♦Adividendisaredistributionfromearnings.

♦Mostcompaniesmaintainadividendpolicywherebytheypayaregulardividendonaquarterlybasis.

♦Somecompaniespayanextradividendtorewardshareholdersifthey’vehadaparticularlygoodyear.Manycompaniespaydividendsaccordingtoapresetpayoutratio,whichmeasurestheproportionofdividendstoearnings.

♦Manycompanieshavepaidregulardividendsforoverahundredyears.

♦Dividendgrowthtendstolagbehindearningsgrowthformostcorporations（seeexamplenextslide）.

♦Sincedividendpolicyisoneofthefactorsthatdrivesaninvestor’sdecisiontopurchaseastock,mostcompaniesannouncetheirdividendpolicyandtelegraphanyexpectedchangesinpolicytothepublic.

♦Therefore,itcanbeseenthatmanycompaniesusetheirdividendpolicytoprovideinformationnototherwiseavailabletoinvestors.

♦Dateofrecord:

Thedateonwhichinvestorsmustownsharesinordertoreceivethedividendpayment.

♦exdividenddate:

Fourdayspriortothedateofrecord.Thedayonwhichastocktradesexdividend（exclusiveofdividends）.

♦Inthefinancialpress:

Transactionsinthestockontheexdividenddateareindicatedbyan“x”nexttothevolumeoftransactions.

♦Ingeneral,stockpricesfallbyanamountequaltothequarterlydividendontheexdividenddate.

♦Distributiondate:

Thedayonwhichadividendispaid（paymentdate）tostockholders.Itisusuallytwoormoreweeksbeforestockholderswhoownedsharesonthedateofrecordreceivetheirdividends.

CashDividendPaymentProcedures

♦AtthequarterlydividendmeetingonJune10th,theJillianCompanyboardofdirectorsdeclaredan$.80cashdividendforholdersofrecordonMonday,July1st.Thefirmhad100,000sharesofstockoutstanding.Thepayment（distribution）datewassetatAugust1st.Beforethemeeting,therelevantaccountsshowedthefollowing.

⏹Whenthedividendwasannouncedbythedirectors,$80,000oftheretainedearnings（$.80/sharex100,000shares）wastransferredtothedividendspayableaccount.Asaresult,thekeyaccountschangedasfollows:

⏹JillianCompany’sstockbegansellingexdividendonJune25th,4dayspriortothedateofrecord（July1st）.Thisdatewasfoundbysubtracting6days（becauseoftheweekend）fromJuly1st.

⏹StockholdersofrecordonJune24thorearlierreceivedtherightstothedividends,whilethosepurchasingonJune25thorlaterdidnot.Assumingastablemarket,thepriceofthestockwasexpectedtodropby$.80/shareonJune25th.WhentheAugust1stpaymentdatearrived,thefirmmailedpaymentstoholdersofrecordandrecordedthefollowing:

⏹Thus,theneteffectofthedividendpaymentisareductionofthefirm’sassets（throughareductionincash）andequity（throughareductioninretainedearnings）byatotalof$80,000（thedividendpayment）.

DividendReinvestmentPlans

⏹Dividendreinvestmentplans（DRIPS）permitstockholderstoreinvesttheirdividendstopurchaseadditionalsharesratherthantobepaidoutincash.

⏹Withbank-directedDRIPS,bankspurchaseadditionalsharesontheopenmarketinhugeblockswhichsubstantiallyreducespersharecommissions.

⏹Withcompany-directedDRIPS,thecompanyitselfissuesnewsharesinexchangeforthecashdividendcompletelyeliminatingcommissions.

⏹Withbrokerage-directedDRIPS,brokeragefirmssuchasCharlesSchwabwillreinvestdividendsforshareholderswhoholdstocksinstreetnameatnocharge.

AdvantagesofDRIPS

⏹ForStockholders

♦Substantialreductionincommissioncosts.

♦Theyprovideinvestorswithanautomaticsavingsmechanism.

⏹ForCompanies

♦Goodwill

♦Reductionincostofdeliveringdividendchecks.

♦Aninexpensivemeansofraisingequitycapitalforfirmscompany-directedplans.

DividendPolicyTheory

⏹TheResidualTheoryofDividends

♦Theresidualtheoryofdividendssuggeststhatdividendpaymentsshouldbeviewedasresidual—theamountleftoverafterallacceptableinvestmentopportunitieshavebeenundertaken.

♦Usingthisapproach,thefirmwouldtreatthedividenddecisioninthreestepsasshownonthefollowingslide.

♦Insum,thistheorysuggeststhatnocashdividendispaidaslongasthefirm’sequityneedisinexcessoftheamountofretainedearnings.

♦Furthermore,itsuggeststhattherequiredreturndemandedbystockholdersisnotinfluencedbythefirm’sdividendpolicy—apremisethatinturnsuggeststhatdividendpolicyisirrelevant.

⏹DividendIrrelevanceArguments

♦MertonMillerandFrancoModigliani（MM）developedatheory