FI.Chapter16 - .tt i,i l|t fli;ti,Ilu ll i;i,t4'l6 The...

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ChaplLd:r 'l6 Chapter 17 Chapter.nS ' .tt: .. i:' .'_.' :-' ..",*;",- i. lt - , | fli ;ti, { Ilu ll, : i,;i.:".;,,. Capital StrucLure Dc'cisions: The Basics .564 Capital Structure L)ecisions: Ertensions 606 Distributions to Slrareholcle'rs: Dividends and Repurchases 639 ,t4
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*ar.'eaal S€ra,aetg;ie &sr;aaEo*s : 3 ile S*=r*:+ conrpany can obtain lonB-tcl nr financnrg in the tufm of equit)', dcbL, or some combinatiol. Thc rcconrpn- nyinS t;rble shoR's the lon:j'tcrn.lcbt raiios ior diffcrcnt business seclors, alonB $iih selccted indi!idual conpanies within thosr suclors. There are obviolrs differcncrs bL't\\'ccn sectors' ar.eragc dcbt raiios, with T,.hn.'l, g! hdrrne " !er\ l,'s .,!er.rc( r.rti" (17{) a d others, sLrch as Ulilitics (an)'?), having nrcir higher ratios. BLrt notic.'ihnt )"li' l'.,i" ill;li"iT *.'.l];i:il lii::: i]: I !. r) hrgh le\e - F,', , \,rrp '. rl'( .r\r,.c. J. b' r,rlio i^raor"ullr, \,'r ,)(li. .,lrs l( hrr -r,,rl.u.L. l'd. r o lor; len), J. hL sl., r.. as Kellogg has 59%. Whv do \^'c soo sudl \indlio|l.r. ..*.,.Tp.rniF\ In.ibI.in,.-. - I^r- nrd dr' ,,,unrp.r\ r)rl( il.('rrur" vnluable through its choicc of clebt ratio? Keep thes.'quesuons in mind as you rrad I o,ig lcr Scckr.rd i)fhl l{rti,) Con1prny D.bi l{itio .reute6,.om ond ent-"r the ticker symbol for o tock qlore. Click on Rorios (o. rhe leh) Io. upclales on lh€ seclor debt rolio in ihe tobe is ihe percent of ong- debr)/(tonsrerm debr - Equ ry). (c\$) Seri.es 45 Adtuinistaffli. (ASlr) 14 Allied tvaste ltlduslrics (A!!) 67 (aifl/n/r{il) Te.hnology lntlrit hc. oNTU) IKON Officc Solulions (lKN) Energy llxron\tobil Corpontnrt (XOV) Chesapeake Ederev co.p (CHK) I'attcrson Dentil Con+1r.v (l,DCO) HCA Inc. (HCA) Uniicd Pircel Serlice (U|S) ContinentalAirlines 1n. . (( l-) 17% ConsuDrer/Non.y.li.nl 45r, ., <..,rb.1.4,,. .r. .r,r (SBUX) \2 Y -luj!,4. .1 '. r'\ tY - 2q ( onglomerJle. t0 u Vinnc orr \'lin'r t & I4lF I. (M\rM) rn .|tir,.oT ro) \J 26 Ulililier b0 : R-i.,,r fr. ro) tr. /RRtr 70 CMS Energ) Corporati(nr 73 37 lr i ri.i r i*
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Long Tem Se.h)r arll l)ebi R!ti() Conipany l-ong-Tcrnr Dcbt I{aiio Anglo American PLC (AAUK) Century Alumirum Company (CENX) Capital Goods Winnebago Industries (wGo) Caterpilhr In. . (CAT) 42 21 89 41 0 76 57 0 Consumer Cyclical Calliw.y GolfCompany 0tLY) Rlnck & Dacker Corp. (tsDK) J7 As we salv in Chaptcrs 14 and 15, all firms need operating capit.l k) support their sales. To acqujrc thai opcrating capiidi, funds nlrst be rajsed, risually as a combi' nation oI equitt, and debt. The firm's mixtlrrc of debi ar]d equit)' is called its cap- ital structure. Althou Bh actlral lcvels ofdc'bt and e'quity may lary somervhat ovcr iine, most firDs try io keep thcir financing nix closc'to a largel capital structure. Alifln's capital structure dedsion iDcludcs its choice of a larget capital structure, ihe a\.erage maturity of its dcbt, and thc spccific types ol financing il decides to use at an]' particular tnne. As with opcrating decisiors, DmnaSers should makc capital structure decisicrrs dcsign!\{ k) nraximizc thc fimr's value. l6.i ,{ Preview of Capital Stnrclurc lssues Recall from Chapter l5 that the value ofa firnis opcrations is the present value of Its expected futLLre free cash flor/s (FCF), discountcd It its $'eight€d ar.erage cost oi capital (WACC): The lerrbook's Web sile conidins dn Excel file lhol the choprer's colculorons.
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This note was uploaded on 06/08/2009 for the course FI 601-602 FI601-602 taught by Professor Prof.geary during the Spring '09 term at New Haven.

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FI.Chapter16 - .tt i,i l|t fli;ti,Ilu ll i;i,t4'l6 The...

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