公司税务与债务政策管理研讨.pptx
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公司税务与债务政策管理研讨.pptx
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Review,PreMid-Term-Debtvs.EquityoverviewLastLecture(Ch17)reintroducedthesetopicsNow-Wewillbegintoaddrealworldcomplexities.,TopicsCovered,DebtandValueinaTaxFreeEconomyCorporateTaxesandDebtPolicyCostofFinancialDistressExplainingFinancialChoices,M&M(DebtPolicyDoesntMatter),Modigliani&MillerWhentherearenotaxesandcapitalmarketsfunctionwell,itmakesnodifferencewhetherthefirmborrowsorindividualshareholdersborrow.Therefore,themarketvalueofacompanydoesnotdependonitscapitalstructure.,M&M(DebtPolicyDoesntMatter),AssumptionsByissuing1securityratherthan2,companydiminishesinvestorchoice.Thisdoesnotreducevalueif:
Investorsdonotneedchoice,ORTherearesufficientalternativesecuritiesCapitalstructuredoesnotaffectcashflowse.g.NotaxesNobankruptcycostsNoeffectonmanagementincentives,Example-RiverCruises-AllEquityFinanced,M&M(DebtPolicyDoesntMatter),Examplecont.50%debt,M&M(DebtPolicyDoesntMatter),Example-RiverCruises-AllEquityFinanced-Debtreplicatedbyinvestors,M&M(DebtPolicyDoesntMatter),FinancialRisk-Risktoshareholdersresultingfromtheuseofdebt.FinancialLeverage-Increaseinthevariabilityofshareholderreturnsthatcomesfromtheuseofdebt.InterestTaxShield-Taxsavingsresultingfromdeductibilityofinterestpayments.,C.S.&CorporateTaxes,Example-YouownalltheequityofSpaceBabiesDiaperCo.Thecompanyhasnodebt.Thecompanysannualcashflowis$1,000,beforeinterestandtaxes.Thecorporatetaxrateis40%.Youhavetheoptiontoexchange1/2ofyourequitypositionfor10%bondswithafacevalueof$1,000.Shouldyoudothisandwhy?
C.S.&CorporateTaxes,Example-YouownalltheequityofSpaceBabiesDiaperCo.Thecompanyhasnodebt.Thecompanysannualcashflowis$1,000,beforeinterestandtaxes.Thecorporatetaxrateis40%.Youhavetheoptiontoexchange1/2ofyourequitypositionfor10%bondswithafacevalueof$1,000.Shouldyoudothisandwhy?
AllEquity1/2DebtEBIT1,000InterestPmt0PretaxIncome1,000Taxes40%400NetCashFlow$600,C.S.&CorporateTaxes,AllEquity1/2DebtEBIT1,0001,000InterestPmt0100PretaxIncome1,000900Taxes40%400360NetCashFlow$600$540,Example-YouownalltheequityofSpaceBabiesDiaperCo.Thecompanyhasnodebt.Thecompanysannualcashflowis$1,000,beforeinterestandtaxes.Thecorporatetaxrateis40%.Youhavetheoptiontoexchange1/2ofyourequitypositionfor10%bondswithafacevalueof$1,000.Shouldyoudothisandwhy?
C.S.&CorporateTaxes,C.S.&CorporateTaxes,AllEquity1/2DebtEBIT1,0001,000InterestPmt0100PretaxIncome1,000900Taxes40%400360NetCashFlow$600$540,TotalCashFlowAllEquity=600*1/2Debt=640(540+100),Example-YouownalltheequityofSpaceBabiesDiaperCo.Thecompanyhasnodebt.Thecompanysannualcashflowis$1,000,beforeinterestandtaxes.Thecorporatetaxrateis40%.Youhavetheoptiontoexchange1/2ofyourequitypositionfor10%bondswithafacevalueof$1,000.Shouldyoudothisandwhy?
CapitalStructure,PVofTaxShield=(assumeperpetuity),DxrDxTcrD,=DxTc,CapitalStructure,PVofTaxShield=(assumeperpetuity),DxrDxTcrD,=DxTc,Example:
Taxbenefit=1000x(.10)x(.40)=$40,CapitalStructure,PVofTaxShield=(assumeperpetuity),DxrDxTcrD,=DxTc,Example:
Taxbenefit=1000x(.10)x(.40)=$40PVof40perpetuity=40/.10=$400,CapitalStructure,PVofTaxShield=(assumeperpetuity),DxrDxTcrD,=DxTc,Example:
Taxbenefit=1000x(.10)x(.40)=$40PVof40perpetuity=40/.10=$400PVTaxShield=DxTc=1000x.4=$400,CapitalStructure,FirmValue=ValueofAllEquityFirm+PVTaxShield,CapitalStructure,FirmValue=ValueofAllEquityFirm+PVTaxShield,ExampleAllEquityValue=600/.10=6,000,CapitalStructure,FirmValue=ValueofAllEquityFirm+PVTaxShield,ExampleAllEquityValue=600/.10=6,000PVTaxShield=400,CapitalStructure,FirmValue=ValueofAllEquityFirm+PVTaxShield,ExampleAllEquityValue=600/.10=6,000PVTaxShield=400FirmValuewith1/2Debt=$6,400,C.S.&Taxes(Personal&Corp),RelativeAdvantageFormula(DebtvsEquity),1-TP,(1-TPE)(1-TC),C.S.&Taxes(Personal&Corp),RelativeAdvantageFormula(DebtvsEquity),1-TP,(1-TPE)(1-TC),RAF1DebtRAF1Equity,Advantage,Example1,AllDebtAllEquity,IncomeBTCP1.00lessTC=.460.00IncomeBTP1.00TaxesTP=.5TPE=00.50AfterTaxIncome0.50,C.S.&Taxes(Personal&Corp),Example1,AllDebtAllEquity,IncomeBTCP1.001.00lessTC=.460.000.46IncomeBTP1.000.54TaxesTP=.5TPE=00.500.00AfterTaxIncome0.500.54,C.S.&Taxes(Personal&Corp),Example1,AllDebtAllEquity,IncomeBTCP1.001.00lessTC=.460.000.46IncomeBTP1.000.54TaxesTP=.5TPE=00.500.00AfterTaxIncome0.500.54,RAF=.926,AdvantageEquity,C.S.&Taxes(Personal&Corp),Example2,AllDebtAllEquity,IncomeBTCP1.00lessTC=.340.00IncomeBTP1.00TaxesTP=.28TPE=.210.28AfterTaxIncome0.72,C.S.&Taxes(Personal&Corp),Example2,AllDebtAllEquity,IncomeBTCP1.001.00lessTC=.340.000.34IncomeBTP1.000.66TaxesTP=.28TPE=.210.280.139AfterTaxIncome0.720.521,C.S.&Taxes(Personal&Corp),Example2,AllDebtAllEquity,IncomeBTCP1.001.00lessTC=.340.000.34IncomeBTP1.000.66TaxesTP=.21TPE=.280.280.139AfterTaxIncome0.720.521,RAF=1.381,AdvantageDebt,C.S.&Taxes(Personal&Corp),TodaysRAF&DebtvsEquitypreference.OldTaxCode,1-.28,(1-.28)(1-.34),=1.52,RAF=,C.S.&Taxes(Personal&Corp),TodaysRAF&DebtvsEquitypreference.NewTaxCode,1-.28,(1-.20)(1-.34),=1.36,RAF=,C.S.&Taxes(Personal&Corp),TodaysRAF&DebtvsEquitypreference.,1-.28,(1-.20)(1-.34),=1.36,RAF=,Whyarecompaniesnotalldebt?
C.S.&Taxes(Personal&Corp),CapitalStructure,StructureofBondYieldRates,D,E,BondYield,r,WeightedAverageCostofCapitalwithouttaxes(traditionalview),r,DV,rD,rE,IncludesBankruptcyRisk,WACC,FinancialDistress,CostsofFinancialDistress-Costsarisingfrombankruptcyordistortedbusinessdecisionsbeforebankruptcy.,FinancialDistress,CostsofFinancialDistress-Costsarisingfrombankruptcyordistortedbusinessdecisionsbeforebankruptcy.MarketValue=ValueifallEquityFinanced+PVTaxShield-PVCostsofFinancialDistress,FinancialDistress,Debt,MarketValueofTheFirm,Valueofunleveredfirm,PVofinteresttaxshields,Costsoffinancialdistress,Valueofleveredfirm,Optimalamountofdebt,Maximumvalueoffirm,FinancialChoices,Trade-offTheory-Theorythatcapitalstructureisbasedonatrade-offbetweentaxsavingsanddistresscostsofdebt.PeckingOrderTheory-Theorystatingthatfirmsprefertoissuedebtratherthanequityifinternalfinanceisinsufficient.,Investment&FinancingInteraction,AdjustedPresentValueAPV=BaseCaseNPV+PVImpactBaseCase=AllequityfinancefirmNPVPVImpact=allcosts/benefitsdirectlyresultingfromproject,example:
ProjectAhasanNPVof$150,000.Inordertofinancetheprojectwemustissuestock,withabrokeragecostof$200,000.,Investment&FinancingInteraction,example:
ProjectAhasanNPVof$150,000.Inordertofinancetheprojectwemustissuestock,withabrokeragecostof$200,000.ProjectNPV=150,000Stockissuecost=-200,000AdjustedNPV-50,000dontdotheproject,Investment&FinancingInteraction,example:
ProjectBhasaNPVof-$20,000.Wecanissuedebtat8%tofinancetheproject.ThenewdebthasaPVTaxShieldof$60,000.AssumethatProjectBisyouronlyoption.,Investment&FinancingInteraction,example:
ProjectBhasaNPVof-$20,000.Wecanissuedebtat8%tofinancetheproject.ThenewdebthasaPVTaxShieldof$60,000.AssumethatProjectBisyouronlyoption.ProjectNPV=-20,000Stockissuecost=60,000AdjustedNPV40,000dotheproject,Investment&FinancingInteraction,AdjustedPresentValueAdjustedDiscountRate,Investment&FinancingInteraction,AdjustedCostofCapital(alternativetoWACC)M&MFormula-ADR=r(1-TcL)L=Debt/Valuer=CostofequityallequityTc=CorpTaxRatealternativetoWACC(almostsameresults),Investment&FinancingInteraction,AdjustedCostofCapital(alternativetoWACC),Investment&FinancingInteraction,MilesandEzzell,AdjustedPresentValueAdjustedDiscountRateWeightedAverageCostofCapital,Investment&FinancingInteraction,AfterTaxWACC,Thetaxbenefitfrominterestexpensedeductibilitymustbeincludedinthecostoffunds.Thistaxbenefitreducestheeffectivecostofdebtbyafactorofthemarginaltaxrate.,OldFormula,AfterTaxWACC,TaxAdjustedFormula,AfterTaxWACC,Example-SangriaCorporationThefirmhasamarginaltaxrateof35%.Thecostofequityis14.6%andthepretaxcostofdebtis8%.Giventhebookandmarketvaluebalancesheets,whatisthetaxadjustedWACC?
AfterTaxWACC,Example-SangriaCorporation-continued,AfterTaxWACC,Example-SangriaCorporation-continued,MARKETVALUES,AfterTaxWACC,Example-SangriaCorporation-continued,Debtratio=(D/V)=50/125=.4or40%Equityratio=(E/V)=75/125=.6or60%,AfterTaxWACC,Example-SangriaCorporation-continued,AfterTaxWACC,Example-SangriaCorporation-continuedThecompanywouldliketoinvestinaperpetualcrushingmachinewithcashflowsof$2.085millionperyearpre-tax.Givenaninitialinvestmentof$12.5million,whatisthevalueofthemachine?
AfterTaxWACC,Example-SangriaCorporation-continuedThecompanywouldliketoinvestinaperpetualcrushingmachinewithcashflowsof$2.085millionperyearpre-tax.Givenaninitialinvestmentof$12.5million,whatisthevalueofthemachine?
AfterTaxWACC,Example-SangriaCorporation-continuedThecompanywouldliketoinvestinaperpetualcrushingmachinewithcashflowsof$2.085millionperyearpre-tax.Givenaninitialinvestmentof$12.5million,whatisthevalueofthemachine?
REMEMBERCashFlowisBIAT=Beforeinterestaftertaxes,AfterTaxWACC,Preferredstockandotherformsoffinancingmustbeincludedintheformula,AfterTaxWACC,Example-SangriaCorporation-continuedCalculateWACCgivenpreferredstockis$25miloftotalequityandyields10%.,TricksoftheTrade,Whatshouldbeincludedwithdebt?
Long-termdebt?
Short-termdebt?
Cash(nettedoff?
)Receivables?
Deferredtax?
TricksoftheTrade,Howar
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- 公司 税务 债务 政策 管理 研讨