公司理财本科班第八讲红利政策和资本结构课件

第八讲支付政策和资本结构CorporateFinance第八讲支付政策和资本结构CorporateFinance1支付政策

PAYOUTPOLICYCorporateFinance支付政策

PAYOUTPOLICYCorporateFi2FACTSABOUTPAYOUTCashDividendversusStockRepurchaseCashDividendDividendsarerarelycutback,managersdonotincreasedividendsunlessconfidentthatdividendcanbemaintainedStockRepurchaseRepurchasesaremoreflexibleandrepurchasesaretax-advantagedFACTSABOUTPAYOUTCashDividen3DividendPaymentExxonMobildeclaresquarterlydividendof$.42pershareSharesstarttotradeex-dividendDividendwillbepaidtoshareholdersregisteredonthisdateDividendchecksmailedtoshareholdersJanuary5,2012February8,2012February10,2012March9,2012Declarationdate公告Ex-dividendDate除息日DatethatdetermineswhenstockholderisentitledtodividendpaymentRecordDate登记日PersonwhoownsstockonthisdatereceivesdividendPaymentDate支付日DividendPaymentExxonMobilSha4FormsofdividendpaymentCashDividend（现金分红）SpecialCashDividendRegularCashDividendStockDividend（送股）Distributionofadditionalsharestofirm’sstockholdersStockSplits（股票拆细）Issueofadditionalsharestofirm’sstockholdersNoEffectonfirmvalueFormsofdividendpaymentCash5ShareRepurchaseFourmethodsBuySharesontheOpenMarketTenderOffertoShareholders（要约收购，20%over-price）DutchAuction（荷兰式拍卖，投资者报出卖股数）PrivateNegotiation(greenmail)ShareRepurchaseFourmethods6DividendPaymentvsShareRepurchaseShareRepurchaseactslikebumperdividends(逆回购充当缓冲器):企业经营好时，积累大量未使用资金，通过逆回购改变资本结构。经济繁荣时股票逆回购较多。DittmarandDittmar2004:Repurchasesincreasewithincreasesinbothpermanentandtransitoryearnings.Changeindividendspaidisnotrelatedtotransitoryearningsbutratheronlypermanentshiftsinearningsthatresultfromchangesinthemacro-economy.DividendPaymentvsShareRepu7ResearchapproachStep1:Temporyearnings:cointegrationresidualPermanentearnings:impactthatchangesofGDP

haveonaggregatepayoutpolicyStep2:Investigaterelationbetweenchangesinstockrepurchase(dividend)andearningsResearchapproachStep1:8InformationcontentofdividendandrepurchasesDividendstockrepurchasedecisionscontaininformationDividendincreasescouldmeanoverpricedstockorincreasedfutureprofitsStockrepurchasecouldmeanunderpricedstockorincreasedfutureprofitsSignalvariesbasedonpriorinformationaboutcompanyInformationcontentofdividen9Ispayoutrelevant？公司理财本科班第八讲红利政策和资本结构课件10Middle-of-the-roadparty(中间派)Dividendpolicyisirrelevantinperfectcapitalmarket（ModiglianiandMiller）:Middle-of-the-roadparty(中间派)11Rightist（保守派）DividendsincreasevalueDividendincreasessendgoodnewsaboutcash-flowearningsDividendcutssendbadnews High-dividendpayoutpolicywillbecostlytofirmsthatdonothavecashflowtosupportitDividendincreasessignalcompany’sgoodfortuneIncreaseinmanager’sconfidenceinfuturecashflowRightist（保守派）Dividendsincrea12Leftist（激进派）TheDividendClienteleHypothesis:Evidencefromthe2003TaxAct(Kawano,2014,AmericanEconomicJournal:EconomicPolicy);Dodividendclientelesexist?Evidenceondividendpreferencesofretailinvestors(GrahamandKumar,2006,JournalofFinance);LocalDividendClienteles(Beckeretal.,2011,JournalofFinance);Juicingthedividendyield(Harrisetal.,2015,JournalofFinancialEconomics).Shareholdersinhightaxbracketspreferlow-dividendpayingstocksandshareholdersinlowtaxbracketspreferhigh-dividendpayingstocks.若红利应税税率高于资本利得应税税率，公司就应尽可能少发红利，以留存现金或回购股票。Leftist（激进派）TheDividendClie13公司理财本科班第八讲红利政策和资本结构课件14ConclusionHighdividendpayingstockswillbepreferredbytaxexemptorganizationsandlowincomeinvestors;thosestocksyieldingmoreoftheirreturnintheformofcapitalgainswillgravitatetothetaxpayersintheuppertaxbrackets(Miller1977).ConclusionHighdividendpaying15资本结构

CAPITALSTRUCTURECorporateFinance资本结构

CAPITALSTRUCTURECorporat16MMandPeckingOrderTheorem“M-M理论”“啄食顺序理论”

“内源融资—间接融资—债务融资"MMandPeckingOrderTheorem17ModiglianiandMiller(MM)Proposition1:（MM第一定理）CapitalstructuredoesnotaffectcashflowasNotaxesNobankruptcycostsNoeffectonmanagementincentivesModiglianiandMiller(MM)18ModiglianiandMiller(MM)Proposition1:（MM第一定理）CapitalstructuredoesnotaffectcashflowasNotaxesNobankruptcycostsNoeffectonmanagementincentivesModiglianiandMiller(MM)19PropositionIandMMInperfectmarket,leveragehasnoimpactonoperatingincomeandmarketvalueofallsecurities.PropositionIandMMInperf20PropositionIIandMMInperfectmarket,expectedrateofreturnoncommonstockofaleveredfirmincreasesinproportiontothedebt-equityratio(D/E),expressedinmarketvalues.PropositionIIandMMInperfe21FinancialriskandexpectedreturnsPropositionIIandMMWhenthefirmislevered,shareholdersrequireapremiumof(rA

–rD)*D/EFinancialriskandexpectedre22AnexampleforleverageriskMarketvalueoffirm:10000USDNoleveredfirm:10USD*1000sharesLeveredfirm:borrow5000USDthroughdebtwithinterestrate10%,thenpurchase500sharesat10USD.AnexampleforleverageriskMa23LeverageandcostofequityLeverageandcostofequity24LeverageandcostofequityLeverageandcostofequity25Weighted-AverageCostofCapital(WACC)

Weighted-AverageCostofCapit26PROPOSITIONIIandMMPROPOSITIONIIandMM27WACCTRADITIONALVIEWWACCTRADITIONALVIEW28After-TaxWACCDebtratio=(D/V)=7.6/22.6=.34or34%Equityratio=(E/V)=15/22.6=.66or66%After-TaxWACCDebtratio=(D/29After-TaxWACCAfter-TaxWACC30LeverageriskandbetasLeverageriskandbetas31Whyfirmsuseleverage?

Tax-deductibleinterestThetaxdeductibilityofinterestincreasesthetotalincomethatcanbepaidouttobondholdersandstockholdersWhyfirmsuseleverage?

Tax-de32Tax-deductibleinterestTax-deductibleinterest33Corporatetaxes-ExampleYouownallequityofSpaceBabiesDiaperCo.CompanyhasnodebtCompanyhasannualcashflowof$900,000beforeinterestandtaxesCorporatetaxrateis35%Attimezero,youhavetheoptiontoexchange1/2ofyourequitypositionfor5%bondswithfacevalueof$2,000,000.AssumeREforunleveredfirmequalsto5%aswell.Shouldyoudothisandwhy?Corporatetaxes-ExampleYouown34Corporatetaxes-ExamplesExampleContinuedTotalCashFlowAllequity=585*1/2debt=620(520+100)Corporatetaxes-ExamplesExamp35Corporatetaxes-permanenteffect*0.05Corporatetaxes-permanenteffe36CorporatetaxesExampleAll-equityvalue=585/.05=11,700,000PVtaxshield=700,000Firmvalueof½debt=$12,400,000CorporatetaxesExample37CostsoffinancialdistressrDEBond

YieldStructure

ofBondYieldRatesCostsoffinancialdistressrD38Costsoffinancialdistress:TraditionalViewofWACCWithoutTaxes

DVrErrDIncludesBankruptcyRiskFinancialdistressoccurswhenpromisestocreditorsarebrokenorhonoredwithdifficulty.Costsoffinancialdistress:T39CostsoffinancialdistressCostofFinancialDistressCostsarisingfrombankruptcyordistortedbusinessdecisionsbeforebankruptcyMarketValueEqualsValueIf:All-equityfinanced+PVtaxshield−PVcostsoffinancialdistressCostsoffinancialdistressCo40DebtMarketValueoftheFirmValueofunleveredfirmPVofinteresttaxshieldsCostsoffinancialdistressValueofleveredfirmOptimalamountofdebtMaximumvalueoffirmCostsoffinancialdistressDebtMarketValueoftheFirmVa41DirectcostsoffinancialdistressCircularFilecompanyhas$50ofone-yeardebtDirectcostsoffinancialdist42CostsoffinancialdistressCircularFileCompanyhas$50ofone-yeardebtWhydoesequityhaveanyvalue?Shareholderoptiontoobtainrightstoassets bypaying$50debtCostsoffinancialdistressWh43IndirectcostsoffinancialdistressCircularFileCompanyinvests$10,assumesadiscountrateof50%fortheprojectAssumeNPVofprojectis(=$-2)Whatiseffectonmarketvalues?Indirectcostsoffinancialdi44CostsoffinancialdistressCircularFileCompanyValue,Post-ProjectFirmvaluefallsby$2Equity-holdergains$3Costsoffinancialdistress45CostsoffinancialdistressCircularFileCompanyValueAssumessafeprojectwithNPV=$5FirmvaluerisesandlackofpotentialpayoffforshareholderscausesdecreaseinequityvalueCostsoffinancialdistress46CostsoffinancialdistressHenriettaKetchuphastwopossibleinvestmentprojectsCostsoffinancialdistressHen47PECKINGORDEROFFINANCIAL

CHOICES

金融选择中的啄食顺序理论Trade-OffTheoryTheorythatcapitalstructureisbasedontrade-offbetweentaxsavingsanddistresscostsofdebtPecking-OrderTheoryTheorystatingfirmsprefertoissuedebtoverequityifinternalfinancesareinsufficientPECKINGORDEROFFINANCIAL

CH48PECKINGORDEROFFINANCIAL

CHOICESTrade-OffTheoryandPricesStock-for-debtexchangeoffersresultsinstockpricefallingInversely,debt-for-stockexchangeoffersresultsinstockpricerisingIssuingcommonstockdrivesdownstockprices,whereasrepurchasesincreasestockpricesIssuingstraightdebthassmallnegativeimpactPECKINGORDEROFFINANCIAL

CH49PECKINGORDEROFFINANCIAL

CHOICESIssuesandStockPricesWhydosecurityissuesaffectstockpriceswhendemandforfirm’ssecuritiesshouldbeflat?AnyfirmisdropinbucketPlentyofclosesubstitutesLargedebtissuesdonotsignificantlydepressstockpricePECKINGORDEROFFINANCIAL

CH50PECKINGORDEROFFINANCIAL

CHOICESPecking-OrderTheoryFirmspreferinternalfinanceAdapttargetdividendpayoutratiostoinvestmentopportunitieswhileavoidingchangesindividendsPECKINGORDEROFFINANCIAL

CH51PECKINGORDEROFFINANCIAL

CHOICESPecking-OrderTheoryInternallygeneratedcashflowssometimesmorethancapitalexpenditures,othertimesnotDuetodividendpolicies,plusfluctuationsinprofitabilityandinvestmentopportunitiesIfmore,firmpaysoffdebtorinvestsinmarketablesecuritiesIfless,firmfirstdrawsdowncashbalanceorsellsmarketablesecuritiesPECKINGORDEROFFINANCIAL

CH52PECKINGORDEROFFINANCIAL

CHOICESPecking-OrderTheoryIfexternalfinancesarerequired,firmsissuethesafestsecurityfirstTheystartwithdebtthenpossiblyhybridsecurities,suchasconvertiblebonds,thenequityasalastresortPECKINGORDEROFFINANCIAL

CH53PECKINGORDEROFFINANCIAL

CHOICESPecking-OrderTheoryInternalequitymaybebetterthanexternalequityFinancialslackisvaluableIfexternalcapitalisrequireddebtisbetterThereislessroomfordifferenceinopinionsaboutwhatdebtisworthPECKINGORDEROFFINANCIAL

CH54FirmValuationandcapitalstructureCapitalProjectAdjustmentsDiscountrateModifytoreflectcapitalstructure,bankruptcyrisk,otherfactorsPresentvalueAssumefirmfinancedentirelybyequity,makeadjustmentstovaluebasedonfinancingFirmValuationandcapitalstr55After-taxweighted-averagecostofcapitalTax-AdjustedFormulaAfter-taxweighted-averagecos56Example:SangriaCorporationFirmhasmarginaltaxrateof35%.Costofequityis12.4%,pretaxcostofdebtis6%.Givenbookandmarket-valuebalancesheets,whatistax-adjustedWACC?After-taxweighted-averagecostofcapitalExample:SangriaCorporationAf57Example,ContinuedAfter-taxweighted-averagecostofcapitalExample,ContinuedAfter-taxwe58After-taxweighted-averagecostofcapitalExample,ContinuedDebtratio=(D/V)=500/1,250=.4,or40%Equityratio=(E/V)=750/1,250=.6,or60%After-taxweighted-averagecos59After-taxweighted-averagecostofcapitalExample,ContinuedSangriawantstoinvestinmachinewithcashflowsof$1.731millionperyearpre-tax.Whatisvalueofmachine,giveninitialinvestmentof$12.5million?After-taxweighted-averagecos60After-taxweighted-averagecostofcapitalExample,ContinuedAfter-taxweighted-averagecos61After-taxweighted-averagecostofcapitalExample,ContinuedAfter-taxweighted-averagecos62After-taxweighted-averagecostofcapitalExample,ContinuedAfter-taxweighted-averagecos63ValuingbusinessesBusinessvalueusuallycomputedasdiscountedvalueoffuturecashflows(FCF)toavaluationhorizon(H)HorizonvalueisalsocalledterminalvalueValuingbusinesses64ValuingbusinessesPV(freecashflows)PV(horizonvalue)Inthiscase,r=WACCValuingbusinessesPV(freecas65Free-cash-flowprojections,

riocorporation($Millions)Free-cash-flowprojections,

r66Free-cash-flowprojections,

riocorporation($Millions)Free-cash-flowprojections,

r67ValuingbusinessesExample:RioCorporationFreecashflow=profitaftertax+depreciation–investmentinfixedassets–investmentinworkingcapitalFCF=8.7+9.9–(109.6–95)–(11.6–11.1)=$3.5millionValuingbusinessesExample:Rio68ValuingbusinessesExample,ContinuedValuingbusinessesExample,Con69ValuingbusinessesFlow-to-EquityMethodDiscountcashflowstoequityatcostofequitycapital,afterinterestandtaxesIffirmhasconstantdebtratioovertime,flowtoequitywillgivesameanswerasdiscountingtotalcashflowsatWACCandsubtractingdebtValuingbusinessesFlow-to-Equi70UsingWACCinpracticeAfter-TaxWACCPreferredstockandotherformsoffinancingmustbeincludedinformulaUsingWACCinpractice71UsingWACCinpracticeExample,ContinuedCalculateWACCforSangriaCorporationgivenpreferredstockis$25millionoftotalequityandyields10%UsingWACCinpracticeExample,72UsingWACCinpracticeDeterminingCostsofFinancingDerivereturnonequityfrommarketdataCostofdebtsetbymarket,ratingoffirm’sdebtPreferredstockoftenhaspresetdividendrateUsingWACCinpracticeDetermin73Example:SangriaCorporationFirmhasmarginaltaxrateof35%.Costofequityis12.4%,pretaxcostofdebtis6%.Givenbookandmarket-valuebalancesheets,whatistax-adjustedWACC?After-taxweighted-averagecostofcapitalExample:SangriaCorporationAf74Example,ContinuedAfter-taxweighted-averagecostofcapitalExample,ContinuedAfter-taxwe75UsingWACCinpracticeExample,ContinuedSangriaCorporationchangesto20%D/VStep1:ratcurrentdebt

Step2:D/Echangesto25%

Step3:NewWACC

UsingWACCinpractice76AdjustedpresentvalueAdjustedDiscountRateModifytoreflectcapitalstructure,bankruptcyrisk,otherfactorsAdjustedPresentValueAssumeall-equity-financedfirm,adjustvaluebasedonfinancingAdjustedpresentvalueAdjusted77AdjustedpresentvalueAPV=BaseCaseNPV+PVImpactBasecase:All-equity-financedfirmNPVPVimpact:Allcosts/benefitsdirectlyresultingfromprojectfinancingAdjustedpresentvalue78AdjustedpresentvalueExampleProjectAhas$150,000NPV.Firmmustissuestocktofinanceproject,with$200,000brokeragecostProjectNPV=150,000Stockissuecost=−200,000AdjustedNPV=−50,000DonotinvestinProjectAAdjustedpresentvalue79AdjustedpresentvalueExampleProjectBhas−$20,000NPV.Firmcanissuedebtat8%tofinanceproject.NewdebthasPVtaxshieldof$60,000.AssumeProjectBisonlyoptionProjectNPV=−20,000Stockissuecost=60,000AdjustedNPV=40,000InvestinProjectBAdjustedpresentvalue8019-4adjustedpresentvalueExampleRioCorporationAPV19-4adjustedpresentvalue81第八讲支付政策和资本结构CorporateFinance第八讲支付政策和资本结构CorporateFinance82支付政策

PAYOUTPOLICYCorporateFinance支付政策

PAYOUTPOLICYCorporateFi83FACTSABOUTPAYOUTCashDividendversusStockRepurchaseCashDividendDividendsarerarelycutback,managersdonotincreasedividendsunlessconfidentthatdividendcanbemaintainedStockRepurchaseRepurchasesaremoreflexibleandrepurchasesaretax-advantagedFACTSABOUTPAYOUTCashDividen84DividendPaymentExxonMobildeclaresquarterlydividendof$.42pershareSharesstarttotradeex-dividendDividendwillbepaidtoshareholdersregisteredonthisdateDividendchecksmailedtoshareholdersJanuary5,2012February8,2012February10,2012March9,2012Declarationdate公告Ex-dividendDate除息日DatethatdetermineswhenstockholderisentitledtodividendpaymentRecordDate登记日PersonwhoownsstockonthisdatereceivesdividendPaymentDate支付日DividendPaymentExxonMobilSha85FormsofdividendpaymentCashDividend（现金分红）SpecialCashDividendRegularCashDividendStockDividend（送股）Distributionofadditionalsharestofirm’sstockholdersStockSplits（股票拆细）Issueofadditionalsharestofirm’sstockholdersNoEffectonfirmvalueFormsofdividendpaymentCash86ShareRepurchaseFourmethodsBuySharesontheOpenMarketTenderOffertoShareholders（要约收购，20%over-price）DutchAuction（荷兰式拍卖，投资者报出卖股数）PrivateNegotiation(greenmail)ShareRepurchaseFourmethods87DividendPaymentvsShareRepurchaseShareRepurchaseactslikebumperdividends(逆回购充当缓冲器):企业经营好时，积累大量未使用资金，通过逆回购改变资本结构。经济繁荣时股票逆回购较多。DittmarandDittmar2004:Repurchasesincreasewithincreasesinbothpermanentandtransitoryearnings.Changeindividendspaidisnotrelatedtotransitoryearningsbutratheronlypermanentshiftsinearningsthatresultfromchangesinthemacro-economy.DividendPaymentvsShareRepu88ResearchapproachStep1:Temporyearnings:cointegrationresidualPermanentearnings:impactthatchangesofGDP

haveonaggregatepayoutpolicyStep2:Investigaterelationbetweenchangesinstockrepurchase(dividend)andearningsResearchapproachStep1:89InformationcontentofdividendandrepurchasesDividendstockrepurchasedecisionscontaininformationDividendincreasescouldmeanoverpricedstockorincreasedfutureprofitsStockrepurchasecouldmeanunderpricedstockorincreasedfutureprofitsSignalvariesbasedonpriorinformationaboutcompanyInformationcontentofdividen90Ispayoutrelevant？公司理财本科班第八讲红利政策和资本结构课件91Middle-of-the-roadparty(中间派)Dividendpolicyisirrelevantinperfectcapitalmarket（ModiglianiandMiller）:Middle-of-the-roadparty(中间派)92Rightist（保守派）DividendsincreasevalueDividendincreasessendgoodnewsaboutcash-flowearningsDividendcutssendbadnews High-dividendpayoutpolicywillbecostlytofirmsthatdonothavecashflowtosupportitDividendincreasessignalcompany’sgoodfortuneIncreaseinmanager’sconfidenceinfuturecashflowRightist（保守派）Dividendsincrea93Leftist（激进派）TheDividendClienteleHypothesis:Evidencefromthe2003TaxAct(Kawano,2014,AmericanEconomicJournal:EconomicPolicy);Dodividendclientelesexist?Evidenceondividendpreferencesofretailinvestors(GrahamandKumar,2006,JournalofFinance);LocalDividendClienteles(Beckeretal.,2011,JournalofFinance);Juicingthedividendyield(Harrisetal.,2015,JournalofFinancialEconomics).Shareholdersinhightaxbracketspreferlow-dividendpayingstocksandshareholdersinlowtaxbracketspreferhigh-dividendpayingstocks.若红利应税税率高于资本利得应税税率，公司就应尽可能少发红利，以留存现金或回购股票。Leftist（激进派）TheDividendClie94公司理财本科班第八讲红利政策和资本结构课件95ConclusionHighdividendpayingstockswillbepreferredbytaxexemptorganizationsandlowincomeinvestors;thosestocksyieldingmoreoftheirreturnintheformofcapitalgainswillgravitatetothetaxpayersintheuppertaxbrackets(Miller1977).ConclusionHighdividendpaying96资本结构

CAPITALSTRUCTURECorporateFinance资本结构

CAPITALSTRUCTURECorporat97MMandPeckingOrderTheorem“M-M理论”“啄食顺序理论”

“内源融资—间接融资—债务融资"MMandPeckingOrderTheorem98ModiglianiandMiller(MM)Proposition1:（MM第一定理）CapitalstructuredoesnotaffectcashflowasNotaxesNobankruptcycostsNoeffectonmanagementincentivesModiglianiandMiller(MM)99ModiglianiandMiller(MM)Proposition1:（MM第一定理）CapitalstructuredoesnotaffectcashflowasNotaxesNobankruptcycostsNoeffectonmanagementincentivesModiglianiandMiller(MM)100PropositionIandMMInperfectmarket,leveragehasnoimpactonoperatingincomeandmarketvalueofallsecurities.PropositionIandMMInperf101PropositionIIandMMInperfectmarket,expectedrateofreturnoncommonstockofaleveredfirmincreasesinproportiontothedebt-equityratio(D/E),expressedinmarketvalues.PropositionIIandMMInperfe102FinancialriskandexpectedreturnsPropositionIIandMMWhenthefirmislevered,shareholdersrequireapremiumof(rA

–rD)*D/EFinancialriskandexpectedre103AnexampleforleverageriskMarketvalueoffirm:10000USDNoleveredfirm:10USD*1000sharesLeveredfirm:borrow5000USDthroughdebtwithinterestrate10%,thenpurchase500sharesat10USD.AnexampleforleverageriskMa104LeverageandcostofequityLeverageandcostofequity105LeverageandcostofequityLeverageandcostofequity106Weighted-AverageCostofCapital(WACC)

Weighted-AverageCostofCapit107PROPOSITIONIIandMMPROPOSITIONIIandMM108WACCTRADITIONALVIEWWACCTRADITIONALVIEW109After-TaxWACCDebtratio=(D/V)=7.6/22.6=.34or34%Equityratio=(E/V)=15/22.6=.66or66%After-TaxWACCDebtratio=(D/110After-TaxWACCAfter-TaxWACC111LeverageriskandbetasLeverageriskandbetas112Whyfirmsuseleverage?

Tax-deductibleinterestThetaxdeductibilityofinterestincreasesthetotalincomethatcanbepaidouttobondholdersandstockholdersWhyfirmsuseleverage?

Tax-de113Tax-deductibleinterestTax-deductibleinterest114Corporatetaxes-ExampleYouownallequityofSpaceBabiesDiaperCo.CompanyhasnodebtCompanyhasannualcashflowof$900,000beforeinterestandtaxesCorporatetaxrateis35%Attimezero,youhavetheoptiontoexchange1/2ofyourequitypositionfor5%bondswithfacevalueof$2,000,000.AssumeREforunleveredfirmequalsto5%aswell.Shouldyoudothisandwhy?Corporatetaxes-ExampleYouown115Corporatetaxes-ExamplesExampleContinuedTotalCashFlowAllequity=585*1/2debt=620(520+100)Corporatetaxes-ExamplesExamp116Corporatetaxes-permanenteffect*0.05Corporatetaxes-permanenteffe117CorporatetaxesExampleAll-equityvalue=585/.05=11,700,000PVtaxshield=700,000Firmvalueof½debt=$12,400,000CorporatetaxesExample118CostsoffinancialdistressrDEBond

YieldStructure

ofBondYieldRatesCostsoffinancialdistressrD119Costsoffinancialdistress:TraditionalViewofWACCWithoutTaxes

DVrErrDIncludesBankruptcyRiskFinancialdistressoccurswhenpromisestocreditorsarebrokenorhonoredwithdifficulty.Costsoffinancialdistress:T120CostsoffinancialdistressCostofFinancialDistressCostsarisingfrombankruptcyordistortedbusinessdecisionsbeforebankruptcyMarketValueEqualsValueIf:All-equityfinanced+PVtaxshield−PVcostsoffinancialdistressCostsoffinancialdistressCo121DebtMarketValueoftheFirmValueofunleveredfirmPVofinteresttaxshieldsCostsoffinancialdistressValueofleveredfirmOptimalamountofdebtMaximumvalueoffirmCostsoffinancialdistressDebtMarketValueoftheFirmVa122DirectcostsoffinancialdistressCircularFilecompanyhas$50ofone-yeardebtDirectcostsoffinancialdist123CostsoffinancialdistressCircularFileCompanyhas$50ofone-yeardebtWhydoesequityhaveanyvalue?Shareholderoptiontoobtainrightstoassets bypaying$50debtCostsoffinancialdistressWh124IndirectcostsoffinancialdistressCircularFileCompanyinvests$10,assumesadiscountrateof50%fortheprojectAssumeNPVofprojectis(=$-2)Whatiseffectonmarketvalues?Indirectcostsoffinancialdi125CostsoffinancialdistressCircularFileCompanyValue,Post-ProjectFirmvaluefallsby$2Equity-holdergains$3Costsoffinancialdistress126CostsoffinancialdistressCircularFileCompanyValueAssumessafeprojectwithNPV=$5FirmvaluerisesandlackofpotentialpayoffforshareholderscausesdecreaseinequityvalueCostsoffinancialdistress127CostsoffinancialdistressHenriettaKetchuphastwopossibleinvestmentprojectsCostsoffinancialdistressHen128PECKINGORDEROFFINANCIAL

CHOICES

金融选择中的啄食顺序理论Trade-OffTheoryTheorythatcapitalstructureisbasedontrade-offbetweentaxsavingsanddistresscostsofdebtPecking-OrderTheoryTheorystatingfirmsprefertoissuedebtoverequityifinternalfinancesareinsufficientPECKINGORDEROFFINANCIAL

CH129PECKINGORDEROFFINANCIAL

CHOICESTrade-OffTheoryandPricesStock-for-debtexchangeoffersresultsinstockpricefallingInversely,debt-for-stockexchangeoffersresultsinstockpricerisingIssuingcommonstockdrivesdownstockprices,whereasrepurchasesincreasestockpricesIssuingstraightdebthassmallnegativeimpactPECKINGORDEROFFINANCIAL

CH130PECKINGORDEROFFINANCIAL

CHOICESIssuesandStockPricesWhydosecurityissuesaffectstockpriceswhendemandforfirm’ssecuritiesshouldbeflat?AnyfirmisdropinbucketPlentyofclosesubstitutesLargedebtissuesdonotsignificantlydepressstockpricePECKINGORDEROFFINANCIAL

CH131PECKINGORDEROFFINANCIAL

CHOICESPecking-OrderTheoryFirmspreferinternalfinanceAdapttargetdividendpayoutratiostoinvestmentopportunitieswhileavoidingchangesindividendsPECKINGORDEROFFINANCIAL

CH132PECKINGORDEROFFINANCIAL

CHOICESPecking-OrderTheoryInternallygeneratedcashflowssometimesmorethancapitalexpenditures,othertimesnotDuetodividendpolicies,plusfluctuationsinprofitabilityandinvestmentopportunitiesIfmore,firmpaysoffdebtorinvestsinmarketablesecuritiesIfless,firmfirstdrawsdowncashbalanceorsellsmarketablesecuritiesPECKINGORDEROFFINANCIAL

CH133PECKINGORDEROFFINANCIAL

CHOICESPecking-OrderTheoryIfexternalfinancesarerequired,firmsissuethesafestsecurityfirstTheystartwithdebtthenpossiblyhybridsecurities,suchasconvertiblebonds,thenequityasalastresortPECKINGORDEROFFINANCIAL

CH134PECKINGORDEROFFINANCIAL

CHOICESPecking-OrderTheory