公司理財(cái)教學(xué)資料-chap016-資料課件

Chapter16 FinancialLeverageandCapitalStructurePolicy12/3/2023ChapterOutlineTheCapitalStructureQuestionTheEffectofFinancialLeverageCapitalStructureandtheCostofEquityCapitalM&MPropositionsIandIIwithCorporateTaxesBankruptcyCostsOptimalCapitalStructureThePieAgainThePecking-OrderTheoryObservedCapitalStructuresAQuickLookattheBankruptcyProcess16-212/3/2023CapitalRestructuringWearegoingtolookathowchangesincapitalstructureaffectthevalueofthefirm,allelseequalCapitalrestructuringinvolveschangingtheamountofleverageafirmhaswithoutchangingthefirm’sassetsThefirmcanincreaseleveragebyissuingdebtandrepurchasingoutstandingsharesThefirmcandecreaseleveragebyissuingnewsharesandretiringoutstandingdebt16-312/3/2023ChoosingaCapitalStructureWhatistheprimarygoaloffinancialmanagers?MaximizestockholderwealthWewanttochoosethecapitalstructurethatwillmaximizestockholderwealthWecanmaximizestockholderwealthbymaximizingthevalueofthefirmorminimizingtheWACC16-412/3/2023TheEffectofLeverageHowdoesleverageaffecttheEPSandROEofafirm?Whenweincreasetheamountofdebtfinancing,weincreasethefixedinterestexpenseIfwehaveareallygoodyear,thenwepayourfixedcostandwehavemoreleftoverforourstockholdersIfwehaveareallybadyear,westillhavetopayourfixedcostsandwehavelessleftoverforourstockholdersLeverageamplifiesthevariationinbothEPSandROE16-512/3/2023Example:FinancialLeverage,EPSandROE–PartIWewillignoretheeffectoftaxesatthisstageWhathappenstoEPSandROEwhenweissuedebtandbuybacksharesofstock?16-612/3/2023Example:FinancialLeverage,EPSandROE–PartIIVariabilityinROECurrent:ROErangesfrom6%to20%Proposed:ROErangesfrom2%to30%VariabilityinEPSCurrent:EPSrangesfrom$0.60to$2.00Proposed:EPSrangesfrom$0.20to$3.00ThevariabilityinbothROEandEPSincreaseswhenfinancialleverageisincreased16-712/3/2023Break-EvenEBITFindEBITwhereEPSisthesameunderboththecurrentandproposedcapitalstructuresIfweexpectEBITtobegreaterthanthebreak-evenpoint,thenleveragemaybebeneficialtoourstockholdersIfweexpectEBITtobelessthanthebreak-evenpoint,thenleverageisdetrimentaltoourstockholders16-812/3/2023Example:Break-EvenEBIT16-912/3/2023Example:HomemadeLeverage

andROECurrentCapitalStructureInvestorborrows$500anduses$500ofherowntobuy100sharesofstockPayoffs:Recession:100(0.60)-.1(500)=$10Expected:100(1.30)-.1(500)=$80Expansion:100(2.00)-.1(500)=$150Mirrorsthepayoffsfrompurchasing50sharesofthefirmundertheproposedcapitalstructureProposedCapitalStructureInvestorbuys$250worthofstock(25shares)and$250worthofbondspaying10%.Payoffs:Recession:25(.20)+.1(250)=$30Expected:25(1.60)+.1(250)=$65Expansion:25(3.00)+.1(250)=$100Mirrorsthepayoffsfrompurchasing50sharesunderthecurrentcapitalstructure16-1012/3/2023CapitalStructureTheoryModiglianiandMiller(M&M)TheoryofCapitalStructurePropositionI–firmvaluePropositionII–WACCThevalueofthefirmisdeterminedbythecashflowstothefirmandtheriskoftheassetsChangingfirmvalueChangetheriskofthecashflowsChangethecashflows16-1112/3/2023CapitalStructureTheoryUnderThreeSpecialCasesCaseI–AssumptionsNocorporateorpersonaltaxesNobankruptcycostsCaseII–AssumptionsCorporatetaxes,butnopersonaltaxesNobankruptcycostsCaseIII–AssumptionsCorporatetaxes,butnopersonaltaxesBankruptcycosts16-1212/3/2023CaseI–PropositionsIandIIPropositionIThevalueofthefirmisNOTaffectedbychangesinthecapitalstructureThecashflowsofthefirmdonotchange;therefore,valuedoesn’tchangePropositionIITheWACCofthefirmisNOTaffectedbycapitalstructure16-1312/3/2023CaseI-EquationsWACC=RA=(E/V)RE+(D/V)RD

RE=RA+(RA–RD)(D/E)

RAisthe“cost”ofthefirm’sbusinessrisk,i.e.,theriskofthefirm’sassets(RA–RD)(D/E)isthe“cost”ofthefirm’sfinancialrisk,i.e.,theadditionalreturnrequiredbystockholderstocompensatefortheriskofleverage16-1412/3/2023Figure16.316-1512/3/2023CaseI-ExampleDataRequiredreturnonassets=16%;costofdebt=10%;percentofdebt=45%Whatisthecostofequity?RE=16+(16-10)(.45/.55)=20.91%Supposeinsteadthatthecostofequityis25%,whatisthedebt-to-equityratio?25=16+(16-10)(D/E)D/E=(25-16)/(16-10)=1.5Basedonthisinformation,whatisthepercentofequityinthefirm?E/V=1/2.5=40%16-1612/3/2023TheCAPM,theSMLandPropositionIIHowdoesfinancialleverageaffectsystematicrisk?CAPM:RA=Rf+

A(RM–Rf)Where

Aisthefirm’sassetbetaandmeasuresthesystematicriskofthefirm’sassetsPropositionIIReplaceRAwiththeCAPMandassumethatthedebtisriskless(RD=Rf)RE=Rf+

A(1+D/E)(RM–Rf)16-1712/3/2023BusinessRiskand

FinancialRiskRE=Rf+

A(1+D/E)(RM–Rf)CAPM:RE=Rf+

E(RM–Rf)

E=A(1+D/E)Therefore,thesystematicriskofthestockdependson:Systematicriskoftheassets,A,(Businessrisk)Levelofleverage,D/E,(Financialrisk)16-1812/3/2023CaseII–CashFlowInterestistaxdeductibleTherefore,whenafirmaddsdebt,itreducestaxes,allelseequalThereductionintaxesincreasesthecashflowofthefirmHowshouldanincreaseincashflowsaffectthevalueofthefirm?16-1912/3/2023CaseII-ExampleUnleveredFirmLeveredFirmEBIT5,0005,000Interest0500TaxableIncome5,0004,500Taxes(34%)1,7001,530NetIncome3,3002,970CFFA3,3003,47016-2012/3/2023InterestTaxShieldAnnualinteresttaxshieldTaxratetimesinterestpayment6,250in8%debt=500ininterestexpenseAnnualtaxshield=.34(500)=170PresentvalueofannualinteresttaxshieldAssumeperpetualdebtforsimplicityPV=170/.08=2,125PV=D(RD)(TC)/RD=DTC=6,250(.34)=2,12516-2112/3/2023CaseII–PropositionIThevalueofthefirmincreasesbythepresentvalueoftheannualinteresttaxshieldValueofaleveredfirm=valueofanunleveredfirm+PVofinteresttaxshieldValueofequity=Valueofthefirm–ValueofdebtAssumingperpetualcashflowsVU=EBIT(1-T)/RUVL=VU+DTC16-2212/3/2023Example:CaseII–PropositionIDataEBIT=25million;Taxrate=35%;Debt=$75million;Costofdebt=9%;Unleveredcostofcapital=12%VU=25(1-.35)/.12=$135.42millionVL=135.42+75(.35)=$161.67millionE=161.67–75=$86.67million16-2312/3/2023Figure16.416-2412/3/2023CaseII–PropositionIITheWACCdecreasesasD/EincreasesbecauseofthegovernmentsubsidyoninterestpaymentsRA=(E/V)RE+(D/V)(RD)(1-TC)RE=RU+(RU–RD)(D/E)(1-TC)ExampleRE=12+(12-9)(75/86.67)(1-.35)=13.69%RA=(86.67/161.67)(13.69)+(75/161.67)(9)(1-.35)

RA=10.05%16-2512/3/2023Example:CaseII–

PropositionIISupposethatthefirmchangesitscapitalstructuresothatthedebt-to-equityratiobecomes1.Whatwillhappentothecostofequityunderthenewcapitalstructure?RE=12+(12-9)(1)(1-.35)=13.95%Whatwillhappentotheweightedaveragecostofcapital?RA=.5(13.95)+.5(9)(1-.35)=9.9%16-2612/3/2023Figure16.516-2712/3/2023CaseIIINowweaddbankruptcycostsAstheD/Eratioincreases,theprobabilityofbankruptcyincreasesThisincreasedprobabilitywillincreasetheexpectedbankruptcycostsAtsomepoint,theadditionalvalueoftheinteresttaxshieldwillbeoffsetbytheincreaseinexpectedbankruptcycostAtthispoint,thevalueofthefirmwillstarttodecrease,andtheWACCwillstarttoincreaseasmoredebtisadded16-2812/3/2023BankruptcyCostsDirectcostsLegalandadministrativecostsUltimatelycausebondholderstoincuradditionallossesDisincentivetodebtfinancingFinancialdistressSignificantproblemsinmeetingdebtobligationsFirmsthatexperiencefinancialdistressdonotnecessarilyfileforbankruptcy16-2912/3/2023MoreBankruptcyCostsIndirectbankruptcycostsLargerthandirectcosts,butmoredifficulttomeasureandestimateStockholderswanttoavoidaformalbankruptcyfilingBondholderswanttokeepexistingassetsintactsotheycanatleastreceivethatmoneyAssetslosevalueasmanagementspendstimeworryingaboutavoidingbankruptcyinsteadofrunningthebusinessThefirmmayalsolosesales,experienceinterruptedoperationsandlosevaluableemployees16-3012/3/2023Figure16.616-3112/3/2023Figure16.716-3212/3/2023ConclusionsCaseI–notaxesorbankruptcycostsNooptimalcapitalstructureCaseII–corporatetaxesbutnobankruptcycostsOptimalcapitalstructureisalmost100%debtEachadditionaldollarofdebtincreasesthecashflowofthefirmCaseIII–corporatetaxesandbankruptcycostsOptimalcapitalstructureispartdebtandpartequityOccurswherethebenefitfromanadditionaldollarofdebtisjustoffsetbytheincreaseinexpectedbankruptcycosts16-3312/3/2023Figure17.816-3412/3/2023ManagerialRecommendationsThetaxbenefitisonlyimportantifthefirmhasalargetaxliabilityRiskoffinancialdistressThegreatertheriskoffinancialdistress,thelessdebtwillbeoptimalforthefirmThecostoffinancialdistressvariesacrossfirmsandindustries,andasamanageryouneedtounderstandthecostforyourindustry16-3512/3/2023Figure16.916-3612/3/2023TheValueoftheFirmValueofthefirm=marketedclaims+nonmarketedclaimsMarketedclaimsaretheclaimsofstockholdersandbondholdersNonmarketedclaimsaretheclaimsofthegovernmentandotherpotentialstakeholdersTheoverallvalueofthefirmisunaffectedbychangesincapitalstructureThedivisionofvaluebetweenmarketedclaimsandnonmarketedclaimsmaybeimpactedbycapitalstructuredecisions16-3712/3/2023ThePecking-OrderTheoryTheorystatingthatfirmsprefertoissuedebtratherthanequityifinternalfinancingisinsufficient.Rule1UseinternalfinancingfirstRule2Issuedebtnext,newequitylastThepecking-ordertheoryisatoddswiththetradeofftheory:ThereisnotargetD/EratioProfitablefirmsuselessdebtCompanieslikefinancialslack16-3812/3/2023ObservedCapitalStructureCapitalstructuredoesdifferbyindustryDifferencesaccordingtoCostofCapital2019YearbookbyIbbotsonAssociates,Inc.LowestlevelsofdebtComputerswith5.61%debtDrugswith7.25%debtHighestlevelsofdebtCabletelevisionwith162.03%debtAirlineswith129.40%debt16-3912/3/2023BankruptcyProcess–PartIBusinessfailure–businesshasterminatedwithalosstocreditorsLegalbankruptcy–petitionfederalcourtforbankruptcyTechnicalinsolvency–firmisunabletomeetdebtobligationsAccountinginsolvency–bookvalueo