金融学讲义大纲及课后习题答案详解十六章.docx

金融学讲义大纲及课后习题答案详解十六章.docx

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金融学讲义大纲及课后习题答案详解十六章

CHAPTER16

CAPITALSTRUCTURE

Objectives

Tounderstandhowafirmcancreatevaluethroughitsfinancingdecisions.

?

C'・・・

sfinancingmixin

Toshowhowtotakeaccountofafirmevaluatinginvestmentdecisions.

Outline

16.1InternalversusExternalFinancing

16.2EquityFinancing

16.3DebtFinancing

16.4TheIrrelevaneeofCapitalStructureinaFrictionlessEnvironment

16.5CreatingValuethroughFinancingDecisions

16.6ReducingCosts

16.7DealingwithConflictsofInterest

16.8CreatingNewOpportunitiesforStakeholders

厂16.9FinancingDecisionsinPractice

16.10HowtoEvaluateLeveredInvestments

corporationsinvestmentplans

ofthecapitalmarketthan

broadestbondsandpromisesoffuturepaymentbythecorporation,suchasaccountspayable,leases,andpensions.

Inafrictionlessfinancialenvironment,wherethereareno

taxesortransactioncosts,andcontractsarecostlesstomakeandenforce,thewealthofshareholdersisthesamenomatter

whatcapitalstructurethefirmadopts.

Intherealworldthereareanumberoffrictionsthatcan

and

firm.A

create

causecapitalstructurepolicytohaveaneffectonthewealthofshareholders.Theseincludetaxes,regulations,

conflictsofinterestbetweenthestakeholdersofthe

firm'smanagementmightthereforebeableto

decisionsin

shareholdervaluethroughitscapitalstructure

oneofthreeways:

Byreducingtaxcostsorthecostsofburdensomeregulations.

Byreducingpotentialconflictsofinterestamongvarious

stakeholdersinthefirm.

Byprovidingstakeholderswithfinancialassetsnototherwiseavailabletothem.

Therearethreealternativemethodsusedinestimatingthenetpresentvalueofaninvestmentprojecttotakeaccountoffinancialleverage:

theadjustedpresentvaluemethod,theflowstoequitymethod,andtheweightedaveragecostofcapitalmethod

SolutionstoProblemsatEndofChapter

Debt-EquityMix

1.DividoCorporationisanall-equityfinancedfirmwithatotalmarketvalueof$100million.Thecompanyholds$10millionin

cash-equivalentsandhas$90millioninotherassets.Thereare

1,000,000sharesofDividocommonstockoutstanding,eachwithamarketpriceof$100.DividoCorporationhasdecidedtoissue$20millionofbondsandtorepurchase$20millionworthofitsstock.

a.Whatwillbetheimpactonthepriceofitssharesandonthe

wealthofitsshareholders?

Why?

b.AssumethatDivido'sEBIThasanequalprobabilityofbeing

$20million,or$12million,or$4million.Showtheimpactof

thefinancialrestructuringontheprobabilitydistributionof

earningspershareintheabseneeoftaxes.Whydoesthefact

thattheequitybecomesriskiernotnecessarilyaffect

shareholderwealth?

SOLUTION:

a.InanM&Mfrictionlessenvironment,wheretherearenotaxesandcontractsarecostlesstomakeandenforce,thewealthofshareholdersisthesamenomatterwhatcapitalstructurethefirmadopts.Insuchanenvironment,neitherthestockprice

norshareholders'wealthwouldbeaffected.IntherealworldDivido'smanagementmightbeabletocreateshareholdervaluebyissuingdebtandrepurchasingsharesintwoways:

Byreducingtaxcosts

Byreducingthefreecashflowavailabletomanagementandexposingitselftogreatermarketdiscipline.

b.TheformulaforEPSwithoutdebtis:

EPSlequity=EBIT

1,000,000shares

Theinterestpaymentswillbe$1.2millionperyear（.06x$20million）regardlessoftherealizedvalueofEBITThenumber

ofsharesoutstandingafterexchangingdebtforequitywillbe

StateoftheEconomy

EBIT

Allequityfinancing

With$20millionofdebt

EPS

（1millionshares）

Net

Earnings

EPS（800,000shares）

Badbusiness

$4million

$4pershare

$2.8million

$3.50pershare

Normalbusiness

12

12

10.8

13.50

Goodbusiness

20

20

18.8

23.50

Mean

12

12

10.8

13.50

Standarddeviation

$6.53

$8.16

'sEBITandEPS

ProbabilityDistributionofDivido

800,000.EPSwithdebtistherefore:

EPSthdebt=NetEarnings=EBIT-$1.2million

800,000shares800,000shares

Althoughthesharesofstockbecomeriskierwithdebtfinancing,theexpectedearningspersharegoup.Inafrictionlessfinancialenvironment,theneteffectistoleavethepriceofthestockunaffected.

Leasing

2.PlentileaseandNoleasearevirtuallyidenticalcorporations.

TheonlydiffereneebetweenthemisthatPlentileaseleasesmostofitsplantandequipmentwhereasNoleasebuysitsplantandequipmentandfinancesitbyborrowing.Compareandcontrast

theirmarket-valuebalaneesheets.

SOLUTION:

Market-ValueBalaneeSheetsofNoleaseandPlentilease

Corporations

a.NoleaseCorporation

Assets

LiabilitiesandShareholders'Equity

Plantandequipment

Bonds

Otherassets

Equity

Total

Total

b.PlentileaseCorporation

Assets

LiabilitiesandShareholders'Equity

Plantandequipment

Lease

Otherassets

Equity

Total

Total

Themaindiffereneebetweenthebondsandtheleaseasaformofdebtfinancingiswhobearstheriskassociatedwiththeresidualmarketvalueoftheleasedassetattheendofthetermofthelease.SineeNoleaseCorporationhasboughtits

equipment,itbearsthisrisk.InPlentilease'scase,however,

itisthelessorthatbearsthisresidual-valuerisk.

PensionLiabilities

3.EuropensandAsiapensarevirtuallyidenticalcorporations.

TheonlydiffereneebetweenthemisthatEuropenshasacompletelyunfundedpensionplan,andAsiapenshasafullyfundedpensionplan.Compareandcontrasttheirmarket-valuebalanee

sheets.Whatdiffereneedoesthefundingstatusofthepensionplanmaketothestakeholdersofthesetwocorporations?

SOLUTION:

BalaneeSheetsofAsiapensandEuropensCorporationsa.AsiapensBalaneeSheet

Assets

LiabilitiesandShareholders'Equity

Operatingassets:

Plant,equipment,etc.

Bonds

Pensionliability

Pensionassets:

stocks,bonds,etc.

Shareholders'Equity

Total

Total

b.EuropensBalaneeSheet

Assets

LiabilitiesandShareholders'Equity

Operating

Pension

assets:

Plant,

liability

equipment,etc.

Shareholders'Equity

Total

Total

Asiapenshasfundeditspensionplanbyissuingbondsandinvestingthefundsraisedinasegregatedpoolofpensionfundassets.ThesepensionassetstaketheformofadiversifiedportfolioofstocksandbondsissuedbyothercompaniesandserveascollateralforthepensionbenefitspromisedbyAsiapenstoitsempioyees.InthecaseofEuropens,thereisnosegregatedpoolofpensionassets.ThepensionpromisesofEuropensarebackedbytheassetsofthecompanyitself.Therefore,theempioyeesofAsiapensaremoresecureaboutreceivingtheirpromisedpensionbenefits,sincethebenefitsarecollateralizedbyamorediversifiedportfolioofassets.

Inthecaseofbothcompanies,however,anyunfundedpensionliabilityreducesshareholdersequity.

4.ComfortShoeCompanyofEnglandhasdecidedtospinoffitsTangoDanceShoeDivisionasaseparatecorporationintheUnitedStates.TheassetsoftheTangoDanceShoeDivisionhavethesameoperatingriskcharacteristicsasthoseofComfort.Thecapital

structureofComforthasbeen40%debtand60%equityintermsofmarketingvalues,andisconsideredbymanagementtobeoptimal.

TherequiredreturnonComfort'sassets（ifunievered）is16%peryear,andtheinterestratethatthefirm（andthedivision）mustcurrentlypayontheirdebtis10%peryear.

SalesrevenuefortheTangoShoeDivisionisexpectedtoremain

indefinitelyatlastyear'slevelof$10million.Variablecosts

are55%ofsales.Annualdepreciationis$1million,whichis

exactlymatchedeachyearbynewinvestments.Thecorporatetax

rateis40%.

a.

b.

c.

d.

HowmuchistheTangoShoeDivisionworthinunleveredform?

IftheTangoShoeDivisionisspunoffwith$5millionindebt,howmuchwoulditbeworth?

WhatrateofreturnwilltheshareholdersoftheTangoShoeDivisionrequire?

Showthatthemarketvalueoftheequityofthenewfirmwouldbejustifiedbytheearningstotheshareholders.

SOLUTION:

a.

TheunieveredfreecashflowfortheTangoShoeDivisionwouldbe（in$millions）:

Sales:

Var.Cost:

DepreciationTaxableIncomeTaxes（@40%）After-TaxIncome

Depreciation

$2.1million

Investment1.0FreeCashFlow

Unievered,Tangoisworth:

$2.1million/0.16=$13.125million

b.

c.

d.

IfTangohad$5millionofdebt,itstotalvaluewouldbe:

MarketValuewithDebt=MarketValuewithoutDebt+PVofInterestTaxShield

V.=Vu+TxB

=$13.125+（.4x5）=$15.125million

TangoEquity=$15.125$5=$10.125million

Tango'scostofequitycapitalwouldbe.1778

ke=k+（1-T）（k-r）D/E=.16+（1-.4）（.16-.10）x5/10.125=.1778

Thevalueoftheequityshouldbethepresentvalueoftheexpectednetincomediscountedattherequiredrateofreturnonequity.Theexpectednetincomewillbetheunieveredcashflowlesstheafter-taxcostoftheinterestofthedebt:

$2.1-（.6）（.1x$5）=$2.1-$.3=$1.8millionperyear

S=$1.8million/.1778=$10.125million

5.

Basedontheaboveproblem,SupposethatFoxtrotDanceShoesmakescustomdesigneddanceshoesandisacompetitorofTangoDanceShoes.FoxtrothassimilarrisksandcharacteristicsasTangoexceptthatitiscompletelyunievered.FearfulthatTango

DanceShoesmaytrytotakeoverFoxtrotinordertocontrol

SOLUTION:

a.Currentpricepershare:

$13.125million/.5millions