FM11 Ch 16 Capital Structure Decisions _The Basics

... debt 16 - How can capital structure affect value? V = ∞ ∑ t =1 FCFt t (1 + WACC) WACC = wd (1-T) rd + we rs (Continued…) 16 - A Preview of Capital Structure Effects  The impact of capital structure ... “works.” 16 - 29 Capital Structure Theory  MM theory  Zero taxes  Corporate taxes  Corporate and personal taxes  Trade-off theory  Signaling theory  Debt financing as a managerial constraint 16 ... debt is used 16 - 33 MM relationship between capital costs and leverage when corporate taxes are considered Cost of Capital (%) rs 20 40 60 80 WACC rd(1 - T) Debt/Value 100 Ratio (%) 16 - 34 Miller’s...

FM11 Ch 17 Capital Structure Decisions_Extensions

... lost, so debt financing is less valuable to firms 17 - 29 What does capital structure theory prescribe for corporate managers? MM, No Taxes: Capital structure is irrelevant no impact on value or ... determined But a manager can change a firm's σ by changing the assets the firm invests in That means changing σ can change the value of the equity, even if it doesn't change the expected cash flows: ... 14.00% 17 - 12 Graph the MM relationships between capital costs and leverage as measured by D/V Without taxes Cost of Capital (%) 26 rs 20 WACC 14 rd 20 40 60 80 Debt/Value 100 Ratio (%) 17 - 13...

FM11 Ch 10 The Basics of Capital Budgeting_Evaluating Cash Flows

... if the cash flows of one are unaffected by the acceptance of the other mutually exclusive, if the cash flows of one can be adversely impacted by the acceptance of the other 10 - What is the ... equal the PV of costs TV is found by compounding inflows at WACC Thus, MIRR assumes cash inflows are reinvested at WACC 10 - 29 MIRR for Franchise L (r = 10% ) 10% -100 .0 10. 0 60.0 80.0 10% 10% ... cost of capital Capital rationing 10 - 51 Increasing Marginal Cost of Capital  Externally raised capital can have large flotation costs, which increase the cost of capital  Investors often...

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Chapter 16 financial leverage and capital structure policy

... bankruptcy process 16- 2 Chapter Outline • • • • • • • • • • The Capital Structure Question The Effect of Financial Leverage Capital Structure and the Cost of Equity Capital M&M Propositions I and II with ... Concepts and Skills • Understand the effect of financial leverage on cash flows and the cost of equity • Understand the impact of taxes and bankruptcy on capital structure choice • Understand the ... can increase leverage by issuing debt and repurchasing outstanding shares • The firm can decrease leverage by issuing new shares and retiring outstanding debt 16- 4 Choosing a Capital Structure •...

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FM11 Ch 22 Working Capital Management

... 22 - Basic Definitions  Gross working capital: Total current assets  Net working capital: Current assets - Current liabilities  Net operating working capital (NOWC): Operating ... (More…) 22 -  Working capital management: Includes both establishing working capital policy and then the day-to-day control of cash, inventories, receivables, accruals, and accounts payable  Working ... 10.45% 30.00 2.25x 1.20x 50.00% 22. 22x 32.00 7.00x 12.00x 3.00x 3.50% 21.00% 33.00 22 - How does SKI’s working capital policy compare with the industry?  Working capital policy is reflected in...

FM11 Ch 09 The Cost of Capital

... project using the techniques in Chapter 11  Use judgment to scale up or down the cost of capital for an individual project relative to the divisional cost of capital 9 - 47 Why is the cost of internal ... cost of capital Most firms incorporate tax effects in the cost of capital Therefore, focus on after-tax costs Only cost of debt is affected 9-5 Should we focus on historical (embedded) costs ... reflect the division’s risk and capital structure 9 - 37 What procedures are used to determine the risk-adjusted cost of capital for a particular division?  Estimate the cost of capital that the...

FM11 Ch 04 Risk and Return_The Basics

... (Diversifiable) Risk 35 Stand-Alone Risk, σ p 20 Market Risk 10 20 30 40 2,000+ # Stocks in Portfolio - 27 Stand-alone Market Diversifiable = risk + risk risk Market risk is that part of a security’s stand-alone ... market risk, so prices and returns reflect this lower risk  The one-stock investor bears higher (stand-alone) risk, so the return is less than that required by the risk 4 - 30 How is market risk ... 0.0% Coll 5.0% 10.0% 15.0% Risk (Std Dev.) 20.0% 25.0% - 19 Portfolio Risk and Return Assume a two-stock portfolio with $50,000 in Alta Inds and $50,000 in Repo Men ^ and σ Calculate rp p - 20...

corporate capital structure full paper

... Practice of Corporate Capital Structure Introduction This Paper This paper provides an overview of current capital structure theory together with a detailed analysis of the results of a recent corporate ... Related Papers In addition to this paper, five other papers drawing on the results of the survey include: CFO Views Corporate Debt Structure Corporate Liquidity Corporate Dividend Policy Corporate ... The Theory and Practice of Corporate Capital Structure January 2006 Executive Summary This paper discusses the theory and practice of corporate capital structure, drawing on results from...

ON THE DETERMINANTS OF CAPITAL STRUCTURE: AN EMPIRICAL STUDY OF VIETNAMESE LISTED FIRMS

... Journal of Law economics Franck B and Usha R.Mittoo (2002) The determinants of Capital structure choice: A survey of European firms Friend and Lang, An empirical test of the impact of managerial ... 1984, The capital structure puzzle, Journal of Finance Vol 39, p 575-592 Narayan Rao and Lukose P J., 2000, An Empirical Study on the Determinants of the Capital Structure of Listed Indian Firms ... where of the empirical context of the research Due to the limitation of the study, we could not intelligently discuss why Vietnam and Vietnamese firms as an empirical context yields the result of...

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ON THE DETERMINANTS OF CAPITAL STRUCTURE: AN EMPIRICAL STUDY OF VIETNAMESE LISTED FIRMS

... between woman on the board and performance 1.2 Objectives of the study An objective of the study is to examine in the Vietnamese bank, the link between women’s participation in top management and its ... responsibilities to the Company and its shareholders The Board plays the central role in the Company’s corporate governance and oversees the work of management and the execution of the Company’s ... the company's president and therefore also be one of the inside directors on the board (if not the chairman) * Chief Operations Officer (COO) – Responsible for the corporation's operations, the...

Chapter 13 leverage & capital structure

... basic types of capital, external assessment of capital structure and capital structure theory Explain the optimal capital structure using a graphic view of the firm’s cost of capital functions ... approach to capital structures Review the return and risk of alternative capital structures and their linkage to market value, and other important considerations related to capital structure Copyright ...  Discuss leverage, capital structure, break-even analysis, the operating break-even point and the effects of changing costs on the break-even point Understand the different types of leverage...

CAPITAL STRUCTURE AND FIRM PERFORMANCE IN VIETNAM

... owners, and other providers of capital, or they will invest elsewhere 1.1.2 Capital structure and capital structure policy 1.1.2.1 Leverage, Capital Structure and Optimal Capital Structure a Capital ... between capital structure and firm performance Figure1 Summary of recent studies on the relationship between capital structure and firm performance Studies Impact of capital Other findings structure ... especially financial accounting reports businesses often grasp of existing capital, both in value and in kind, forming the source and the increased volatility, reduced capital during the period,...

CẤU TRÚC vốn với rủi RO đầu tư nước NGOÀI CAPITAL STRUCTURE WITH RISKY FOREIGN INVESTMENT

... nên đầu tư vào quốc gia có rủi ro bất thường Trong thực tế, mô hình đối lập xuất liệu, cho thấy ảnh hưởng lợi nhuận đầu tư rủi ro cấu vốn thống trị tác động lựa chọn cấu trúc vốn rủi ro đầu tư ... chi phí nhà đầu tư nước phải đối đầu với môi trường trị bất ổn Nghiên cứu khảo sát tác động rủi ro thông qua việc đầu tư nước ngoài, rủi ro làm tăng rủi ro tổng thể công ty Mỹ, rủi ro dễ xác định ... rủi ro lên cấu trúc vốn Các công ty người Mỹ đầu tư đa quốc gia thường gặp phải rủi ro đặc biệt nghiêm trọng việc họ đầu tư Mỹ Những rủi ro trị thể biến động lợi nhuận, họ phải đáp lại việc đầu...

Optimal security design and dynamic capital structure in a countinous time agency model DEMARZO & SANNIKOV

... Cadenillas, Abel, Jaksa Cvitanic, and Fernando Zapatero, 2003, Dynamic principal-agent problems with perfect information, Working paper, USC Clementi, Gian Luca, and Hugo A Hopenhayn, 2002, A ... 1998, Agency costs, risk management, and capital structure, Journal of Finance 53, 1213-1243 Leland, Hayne E., and Klaus.B Toft, 1996, Optimal capital structure, endogenous bankruptcy, and the ... (1984), and Bolton and Scharfstein (1990) See also Innes (1990) for optimal security design in a standard principal-agent setting Dewatripont and Tirole (1994) discuss the role of capital structure...

BCKH DETERMINANTS OF CAPITAL STRUCTURE OF LISTED MANUFACTURING THE CASE IN VIETNAM

... The Journal of Finance Trần Đình Khôi Nguyên (2006) Capital structure in small and medium-sized enteprises: the case of Vietnam ASEAN Economic Bulletin Nguyễn Ngọc Vũ (2003) Determinants of ... Cost of Capital, Corporate Finance,and the Theory of Investment” American Economic Review Rajan, R G & Zingales, L, (1995), “What we know about capital structure? Some evidence from international ... of capital structure for listed firms in the Vietnam stock Exchange Market” Danang University Press, Danang, Vietnam Stata Web Book University of California, Los Angeles Panel data analysis using...

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