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CHAPTER 20 Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles. Preferred stock Leasing Warrants Convertibles. Leasing. Often referred to as “off balance sheet” financing if a lease is not “capitalized.” - PowerPoint PPT Presentation
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CHAPTER 20Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles
Preferred stock
Leasing
Warrants
Convertibles
Data:
Depreciable basis = $1,200,000
MACRS DepreciationEnd-of-Year
YearRateExpenseBook Value
1 0.33 $ 396,000 $804,000
2 0.45 540,000 264,000
3 0.15 180,000 84,000
4 0.07 84,000 0
1.00$1,200,000
A-T kd = 10%(1 – T) = 10%(1 – 0.4) =6%.
Analysis in thousands:
0 1 2 3 4
Cost of asset(1,200.0)
Dep. tax savings1 158.4 216.0 72.0 33.6
Maint. (AT)2 (15.0) (15.0) (15.0) (15.0)
Res. value (AT)3 _____________________ 75.0
Net cash flow(1,215.0) 143.4 201.0 57.0108.6
PV cost of owning (@ 6%) = -$766.948.
0 1 2 3 4
Analysis in thousands:
A-T Lease pmt -204 -204 -204 -204
= $17.654
(Dollars in thousands)
VPackage = VBond + VWarrants = $1,000.
VWarrants = 50($1.50) = $75.
VBond + $75= $1,000
VBond= $925.
20
12
-925
1000
INPUTS
N
I/YR
PV
PMT
FV
OUTPUT
110
0 1 4 5 6 19 20
+1,000 -110 -110-110-110-110-110
-250-1,000
-360 -1,110
...
...
20
12
100
1000
INPUTS
N
I/YR
PV
PMT
FV
OUTPUT
-850.61
$1,000 – $850.61 = $149.39.
= $1.87 per share.
C0= 80($10)(1.08)0 = $800.
C10= 80($10)(1.08)10 = $1,727.14.
8
-800
0
1200
INPUTS
N
I/YR
PV
PMT
FV
OUTPUT
5.27
0 1 2 3 4 5
1,000 -100 -100-100 -100 -100
-1,200
-1,300