I. Debt and value

《I. Debt and value》由会员上传分享，免费在线阅读，更多相关内容在学术论文-天天文库。

1、ValuationandfinancingenterprisesProfessorRobertHansenI.DebtandvalueIncomeStatementWeexaminetwoimportantstoriesforthebenefitandSalestcosttradeoffsfromusingdebt.LaterwewillexamineCOGSandSG&AtmorestoriesEBDITAtEarningsbeforedepreciation,interestandtaxesDDEPtDepreciationEB

2、ITtEarningsbeforeinterestandtaxesA.TaxshieldsandbankruptcycostInterestExpensetTheborrowingratetimestheparvalue;rBBB.AgencycostsofdebtandequityEBTEarningsbeforetaxestC.SumupTaxestTx[EBIT–rBB],whereTisthetaxrateNItNetIncome(“Profit”);(1–T)x[EBIT–rBB]12ExampleI.1,A.Debtta

3、xshieldsandbankruptcycostDebttaxshieldLookatthetaxshieldfromthedebt,EBIT=$150,T=30%,andrA=13.33%.ThefirmissuesCompanyUCompanyL$375inperpetualbonds,atinterestcostof8%.Byhowmuchdoesfirmvaluechange?TxEBITTx[EBIT-rBB]TxEBITTxEBIT-TxrBBPerperiodtaxsavingsareTrBB=$9.Theprese

4、ntvalueofthesesavingsisCo.LpaysTrBBlessintaxes.ThisisworthTrBTrBB/rB=TB=$9/.08=$112.5!BLuTxB.SoVVTBrB34BankruptcyTheAbsolutePriorityRuleThefirmisinfinancialdistresswhenoperatingcashClaimsarefullysatisfiedbyseniority.flowsareinsufficienttomeetcurrentobligations,andth

5、efirmmusttakesomesortofcorrectiveCreditors:action.Secured:Paidfirst,maynotbepaidinfullUnsecured:PaidaftersecuredispaidinfullmayButbankruptcyalonedoesnotdestroyvalue(itisreceivenothingpricedin-azerosumgameinwhichsomewinandsomelose).Equityholders:Itisbankruptcycostthat

6、destroysvalue.Paidlastandlikelypaidnothing56I.Debtandvalue1ValuationandfinancingenterprisesProfessorRobertHansenHowtogobankrupt?ExpectedbankruptcycostPrivateworkout:Directcosts(2%to5%)arelegalexpenses,accountingfees,andadministrativecosts.Indirect(17%)costsLowerdirect

7、coststhanbankruptcyaresaleslostduetoheightenedchanceofFeweradvantagesforstockholders,sinceabsolutebankruptcy.prioritytendstobeviolatedinbankruptcysettlementsExante,expectedcostsaresmallerdependingontheFormalbankruptcy:probabilityofbankruptcyAllowsDIPdebtthatisseniort

8、ooutstandingTaxcarry-forwardsarepreservedE[BCost]=Pbankrupt(Lev)xBankruptcyCostsEasierformorecomplicatedcapitalstru