北京大学-公司金融13.pdf

Lecture 9 Capital Structure (2) Example 1: Alpha Corporation and Beta Corporation are identical in every way except their capital structures. Alpha Corporation, an all equity firm, has 5,000 shares of stock outstanding, currently worth $20 per share. Beta Corporation uses leverage in its capital structure. The market value of Beta’s debt is $25,000. The cost of this debt is 12 percent per annum. Each firm is expected to have earnings before interest of $350,000 in perpetuity. Neither firm pays taxes. Assume that every investor can borrow at 12 percent per annum. A What is the value of Alpha Corporation? B What is the value of Beta Corporation? C What is the market value of Beta Corporation’s equity? D How much will it cost to purchase 20 percent of each firm’s equity? E Assuming each firm meets its earnings estimates, what will be the dollar return to each position in part D over the next year? F Construct an investment strategy in which an investor purchases 20 percent of Alpha’s equity and replicates both the cost and dollar return of purchasing 20 percent of Beta’s equity. G Is Alpha’s equity more or less risky than Beta’s equity? Explain. Example (added): (Text 15.4): The Veblen Company and the Knight Company are identical in every respect except that Veblen is not levered. The market value of Knight Company’s 6 percent bonds is $1 million. Financial information for the two firms appears below. All earnings streams are perpetuities. Neither firm pays taxes. Both firms distribute all earnings available to common stockholders immediately. Veblen Knight Projected operating $300,000 $300,000 income Year-end interest on debt 60,000 Projected earnings $300,000 $240,000 available to common stock Re