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Chapter 14

Chapter 14

Chapter 14. Capital Structure in a Perfect Market. Chapter Outline. 14.1 Equity versus Debt Financing 14.2 Modigliani-Miller I: Leverage, Arbitrage, and Firm Value 14.3 Modigliani-Miller II: Leverage, Risk, and the Cost of Capital 14.4 Capital Structure Fallacies

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1.11k views • 110 slides
Chapter 14 Capital Structure in a Perfect Market

Chapter 14 Capital Structure in a Perfect Market

Chapter 14 Capital Structure in a Perfect Market. Chapter Outline. 14.1 Equity versus Debt Financing 14.2 Modigliani-Miller I: Leverage, Arbitrage, and Firm Value 14.3 Modigliani-Miller II: Leverage, Risk, and the Cost of Capital 14.4 Capital Structure Fallacies

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1.02k views • 100 slides
Chapter 14

Chapter 14

Chapter 14. Capital Structure in a Perfect Market. What is the capital structure question?. What considerations should guide firms when making financing decisions? Example (from text):

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647 views • 51 slides
Chapter 14

Chapter 14

Chapter 14. Capital Structure in a Perfect Market. What is the capital structure question?. What considerations should guide firms when making financing decisions? Example (from text):

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531 views • 51 slides
Chapter 14: Income Tax Considerations & After-Tax Cash Flows for the Equity Investor

Chapter 14: Income Tax Considerations & After-Tax Cash Flows for the Equity Investor

Chapter 14: Income Tax Considerations & After-Tax Cash Flows for the Equity Investor. 1) Property level (PBTCF): Net CF produced by property, before subtracting debt svc pmts (DS) and inc. taxes. CFs to Govt, Debt investors (mortgagees), equity owners.

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559 views • 38 slides
Capital Structure

Capital Structure

Capital Structure. Alternative Financial Instruments Patterns of Financing Capital-Structure Theory Modigliani and Miller: No Taxes and With Taxes Limits to the Use of Debt. Common Stock (see page 384). Par Value Capital Surplus Retained Earnings

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533 views • 32 slides
Review

Review

Review. Review Item. An firm has a project with NPV>0 that costs a lot of money. It pays off after the owner dies. Should she invest? In the project? In financial assets? How?. Invest to here. Finance to here. An investment opportunity that increases value. Time one cash flow.

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328 views • 32 slides
Corporate Finance

Corporate Finance

Corporate Finance. Lecture 8. Announcements. 2nd quiz Opens at midnight tonight Valid for 48 hours Closes at midnight of Thursday 2nd case : Boeing 7E7 Questions will be posted on May 8 Delivery deadline: May 13 Discussion: May 15. Topics covered. MM proposition without tax

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327 views • 30 slides
Capital Structure

Capital Structure

Capital Structure. Basic concepts: no taxes. Chapter 15 Capital Structure: Basic Concepts. Capital-structure and pie theory No-arbitrage pricing. Example: shares for debt Value Required return on the levered firm. Financial Leverage, EPS, and ROE. Current Proposed

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323 views • 27 slides
Chapter 21

Chapter 21

Chapter 21. Options Valuation. Option Values. Intrinsic value - profit that could be made if the option was immediately exercised Call: stock price - exercise price Put: exercise price - stock price Time value - the difference between the option price and the intrinsic value. Option

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380 views • 25 slides
Capital Structure II

Capital Structure II

Capital Structure II. Corporate income taxes. Review question. Describe the two basic capital budgeting decisions. Answer. Project acceptance: each project is independent of others. Each is accepted or rejected.

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258 views • 25 slides
Capital Structure and Taxes

Capital Structure and Taxes

Capital Structure and Taxes. One of first and most fundamental theories of modern finance was developed by Modigliani and Miller [1958] (hereafter MM). We will focus on the meat of the theory and its implications.

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426 views • 24 slides
Capital Structure and Valuation

Capital Structure and Valuation

8- 1. Capital Structure and Valuation. Example. Capital Structure. Current. Proposed. Miller and Modigliani: Proposition I. Strategy A: Buy 100 shares of levered equity. Strategy B: Buy 200 shares of unlevered equity using $2,000 in borrowing (Homemade Leverage).

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427 views • 23 slides
Cash Flows in Capital Budgeting

Cash Flows in Capital Budgeting

Cash Flows in Capital Budgeting. Three approaches: Free Cash Flow and WACC Adjusted Present Value Cash Flows to Equity. Effects of Leverage (Debt). Modigliani-Miller (MM) 1958 Showed that value of a firm (project) is not affected by the use of leverage assuming No transaction costs

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327 views • 14 slides

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