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Finanças

Finanças. November 16. Topics covered. Long-term financing Debt Unfunded debt Funded debt Debenture Bond Consol Stock Common stock Preferred stock. Difference between debt and equity. Long-term financing: Common stock. Directly contributed capital Par value

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Finanças

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  1. Finanças November 16 QDai for FEUNL

  2. Topics covered • Long-term financing • Debt • Unfunded debt • Funded debt • Debenture • Bond • Consol • Stock • Common stock • Preferred stock QDai for FEUNL

  3. Difference between debt and equity QDai for FEUNL

  4. Long-term financing: Common stock • Directly contributed capital • Par value • Shares authorized vs. Shares issued • Dedicated capital • Capital surplus • Indirectly contributed capital • Retained earnings • Book value • Market value QDai for FEUNL

  5. S S B B Capital structure • What is the goal of the firm: maximizing V or maximizing S? • Firm value V=B+S QDai for FEUNL

  6. Capital structure: max V vs. max S QDai for FEUNL

  7. Financial leverage: an example Consider an all-equity firm that is considering going into debt. (Maybe some of the original shareholders want to cash out.) Current Assets $20,000 Debt $0 Equity $20,000 Debt/Equity ratio 0.00 Interest rate n/a Shares outstanding 400 Share price $50 Proposed $20,000 $8,000 $12,000 2/3 8% 240 $50 QDai for FEUNL

  8. EPS and ROE Under Current Capital Structure Recession Expected Expansion EBIT $1,000 $2,000 $3,000 Interest Net income EPS ROA ROE Current Shares Outstanding = 400 shares QDai for FEUNL

  9. EPS and ROE Under Proposed Capital Structure Recession Expected Expansion EBIT $1,000 $2,000 $3,000 Interest Net income EPS ROA ROE Proposed Shares Outstanding = 240 shares QDai for FEUNL

  10. Financial Leverage and EPS 12.00 10.00 8.00 6.00 EPS 4.00 2.00 0.00 1,000 2,000 3,000 EBIT in dollars, no taxes (2.00) QDai for FEUNL

  11. Modigliani and Miller (MM) Proposition (no taxes) • Proposition I QDai for FEUNL

  12. Assumptions of the Modigliani-Miller Model • Homogeneous Expectations • Homogeneous Business Risk Classes • Perpetual Cash Flows • Perfect Capital Markets QDai for FEUNL

  13. Homemade Leverage:An Example Recession Expected Expansion EPS of Levered Firm $1.50 $5.67 $9.83 Earnings for 24 shares $36 $136 $236 QDai for FEUNL

  14. Homemade Leverage:An Example Recession Expected Expansion EPS of Unlevered Firm $2.50 $5.00 $7.50 Earnings for 40 shares $100 $200 $300 QDai for FEUNL

  15. The MM Propositions II (No Taxes) • Proposition II QDai for FEUNL

  16. The MM Proposition II (No Taxes) The derivation QDai for FEUNL

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