Lecture 10s - Introduction to Managerial Finance Lecture...

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Introduction to Managerial Finance Lecture Note 10 Prof. H. Wang © copyright 1
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he Capital Structure Question The Capital Structure Question ± The question we have focused on thus far: ± The next question: 2
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Market Value Balance Sheet of the Firm Debt Straight Debt Convertible Debt Assets Equity Preferred Stock Common Stock Warrants The Capital Structure Question 3
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quity Versus Debt Financing Equity Versus Debt Financing ± Capital Structure 4
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he Market Value Balance Sheet (cont'd) The Market Value Balance Sheet (cont d) ± Using the market value balance sheet, the value of equity is computed as: 5
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± Some Data Company Name D / D + E • % Debt Financing = Debt to total capital, D / (D+E) • Market Average 30% AT&T 20% Boeing 15% g Boston Edison 49% John Deere 40% Delta Air Lines 53% Disney 9% General Motors 61% Hewlett-Packard 13% McDonalds 15% Philip Morris 27% 6 Texaco 27% Wal-Mart 14%
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apital Structure and the Cost of Capital Capital Structure and the Cost of Capital ± Most large corporations use a mix of both debt and equity financing • If a firm borrows, or issues stock, investors will demand a
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This document was uploaded on 10/21/2010.

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Lecture 10s - Introduction to Managerial Finance Lecture...

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