习题答案Principles of Corporate Finance第十版 Chapter19.doc

CHAPTER 19 Financing and Valuation Answers to Problem Sets 1. Market values of debt and equity are D = .9 X 75 = $67.5 million and E = 42 X 2.5 = $105 million. D/V = .39. WACC = .09(1 - .35).39 + .18(.61) = .1325, or 13.25%. 2. Step 1: r = .09(.39) + .18(.61) = .145. Step 2: rD = .086, rE = .145 + (.145 - .086)(15/85) = .155. Step 3: WACC = .086(1 - .35).15 + .155(.85) = .14. 3. a. False b. True c. True 4. The method values the equity of a company by discounting cash flows to stockholders at the cost of equity. See Section 19.2 for more details. The method assumes that the debt-to-equity ratio will remain constant. 5. a. True b. False, if interest tax shields are valued separately c. True 6. APV 5 base-case NPV ± PV financing side effects a. APV = 0 - .15(500,000) = -75,000 b. APV = 0 + 76,000 = +76,000 7. a. 12%, of course. b. rE = .12 + (.12 - .075)(30/70) = .139, WACC = .075(1 - .35)(.30) + .139(.70) = .112, or 11.2%.  8. a. Base-case NPV = -1,000 + 1200/1.20 = 0 b. PV tax shield = (.35 X .1 X .3(1000))/1.1 = 9.55. APV = 0 + 9.55 = $9.55 9. No. The more debt you use, the higher rate of -return equity investors will require. (Lenders may demand more also.) Thus there is a hidden cost of the “cheap” debt: It makes equity more expensive. 10. Patagonia does not have 90% debt capacity. KCS is borrowing $45 million partly on the strength of its existing assets. Also the decision to raise bank finance for the purchase does not mean that KCS has changed its target debt ratio. An APV valuation of Patagonia would probably assume a 50% debt ratio. 11. If the bank debt is treated as permanent financing, the capital structure proportions are: Bank debt (rD = 10 percent) $280 9.4% Long-term debt (rD = 9 percent) 1800 60.4 Equity (rE = 18 percent, 90 x 10 million shares) 900 30.2 $2980 100.0% WACC* = [0.10((1 - 0.35)(0.094] + [0.09((1 - 0.35)(0.604] + [0.18(0.302] = 0.096 = 9.6% 12. Forecast af