第十六章资本结构：债务的运用

McGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-0ChapterOutline16.1CostsofFinancialDistress16.2DescriptionofCosts16.3CanCostsofDebtBeReduced?16.4IntegrationofTaxEffectsandFinancialDistressCosts16.5Shirking,Perquisites,andBadInvestments:ANoteonAgencyCostofEquity16.6ThePecking-OrderTheory16.7GrowthandtheDebt-EquityRatio16.8PersonalTaxes16.9HowFirmsEstablishCapitalStructure16.10SummaryandConclusionsMcGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-116.1CostsofFinancialDistress•Bankruptcyriskversusbankruptcycost.•Thepossibilityofbankruptcyhasanegativeeffectonthevalueofthefirm.•However,itisnottheriskofbankruptcyitselfthatlowersvalue.•Ratheritisthecostsassociatedwithbankruptcy.•Itisthestockholderswhobearthesecosts.McGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-216.2DescriptionofCosts•DirectCosts–Legalandadministrativecosts(tendtobeasmallpercentageoffirmvalue).•IndirectCosts–Impairedabilitytoconductbusiness(e.g.,lostsales)–AgencyCosts•Selfishstrategy1:Incentivetotakelargerisks•Selfishstrategy2:Incentivetowardunderinvestment•SelfishStrategy3:MilkingthepropertyMcGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-3BalanceSheetforaCompanyinDistressAssetsBVMVLiabilitiesBVMVCash$200$200LTbonds$300FixedAsset$400$0Equity$300Total$600$200Total$600$200Whathappensifthefirmisliquidatedtoday?Thebondholdersget$200;theshareholdersgetnothing.$200$0McGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-4SelfishStrategy1:TakeLargeRisksTheGambleProbabilityPayoffWinBig10%$1,000LoseBig90%$0Costofinvestmentis$200(allthefirm’scash)Requiredreturnis50%ExpectedCFfromtheGamble=$1000×0.10+$0=$100133$50.1100$200$NPVNPVMcGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-5SelfishStockholdersAcceptNegativeNPVProjectwithLargeRisks•ExpectedCFfromtheGamble–ToBondholders=$300×0.10+$0=$30–ToStockholders=($1000-$300)×0.10+$0=$70•PVofBondsWithouttheGamble=$200•PVofStocksWithouttheGamble=$0•PVofBondsWiththeGamble=$30/1.5=$20•PVofStocksWiththeGamble=$70/1.5=$47McGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-6SelfishStrategy2:Underinvestment•Consideragovernment-sponsoredprojectthatguarantees$350inoneperiod•Costofinvestmentis$300(thefirmonlyhas$200now)sothestockholderswillhavetosupplyanadditional$100tofinancetheproject•Requiredreturnis10%18.18$10.1350$300$NPVNPVShouldweacceptorreject?McGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-7SelfishStockholdersForegoPositiveNPVProject•ExpectedCFfromthegovernmentsponsoredproject:–ToBondholder=$300–ToStockholder=($350-$300)=$50•PVofBondsWithouttheProject=$200•PVofStocksWithouttheProject=$0•PVofBondsWiththeProject=$300/1.1=$272.73•PVofStockswiththeproject=$50/1.1-$100=-$54.55McGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-8SelfishStrategy3:MilkingtheProperty•Liquidatingdividends–Supposeourfirmpaidouta$200dividendtotheshareholders.Thisleavesthefirminsolvent,withnothingforthebondholders,butplentyfortheformershareholders.–Suchtacticsoftenviolatebondindentures.•Increaseperquisitestoshareholdersand/ormanagementMcGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-916.3CanCostsofDebtBeReduced?•ProtectiveCovenants•DebtConsolidation:–Ifweminimizethenumberofparties,contractingcostsfall.McGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-10ProtectiveCovenants•Agreementstoprotectbondholders•Negativecovenant:Thoushaltnot:–Paydividendsbeyondspecifiedamount.–Sellmoreseniordebt&amountofnewdebtislimited.–Refundexistingbondissuewithnewbondspayinglowerinterestrate.–Buyanothercompany’sbonds.•Positivecovenant:Thoushall:–Useproceedsfromsaleofassetsforotherassets.–Allowredemptionineventofmergerorspinoff.–Maintaingoodconditionofassets.–Provideauditedfinancialinformation.McGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-1116.4IntegrationofTaxEffectsandFinancialDistressCosts•Thereisatrade-offbetweenthetaxadvantageofdebtandthecostsoffinancialdistress.•Itisdifficulttoexpressthiswithapreciseandrigorousformula.McGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-12IntegrationofTaxEffectsandFinancialDistressCostsDebt(B)Valueoffirm(V)0PresentvalueoftaxshieldondebtPresentvalueoffinancialdistresscostsValueoffirmunderMMwithcorporatetaxesanddebtVL=VU+TCBV=ActualvalueoffirmVU=ValueoffirmwithnodebtB*MaximumfirmvalueOptimalamountofdebtMcGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCompanies,Inc.Allrightsreserved.16-13ThePieModelRevisited•Taxesandbankruptcycostscanbeviewedasjustanotherclaimonthecashflowsofthefirm.•LetGandLstandforpaymentstothegovernmentandbankruptcylawyers,respectively.•VT=S+B+G+L•TheessenceoftheM&MintuitionisthatVTdependsonthecashflowofthefirm;capitalstructurejustslicesthepie.SGBLMcGraw-Hill/IrwinCopyright©2002byTheMcGraw-HillCom