罗斯《公司理财》英文习题答案chap016.docVIP

Chapter 16: Capital Structure: Limits to the Use of Debt 16.1 a. V = ($250 x 60% + $100 x 40%) / (1+12%) = $169.64 million under risk neutrality. S = ($100 x 60% + $0 x 40%) / (1+12%) = $53.57 million The total stock value of the firm is $53.57 million. b. Assume the expected debt payment in case of recession is $X million. B = ($150 x 60% + $X x 40%) / (1+12%) = $108.93 million X = $80 million Therefore, the bankruptcy cost is expected to be $20 (=100 - 80) million with a probability of 40% in recession. c. Firm value, V = S + B = $53.57 + $108.93 = $162.50 million d. Promised return on bond = ($150 / $108.93) - 1 = 37.70% 16.2 a. Duane is not correct. This risk of bankruptcy per se does not affect firm’s value. It is the costs of bankruptcy, which lower firm value. VanSant Matta Expansion Recession Expansion Recession EBIT $2.0 $0.8 $2.0 $0.8 Interest 0.75 0.75 1.0 0.8 Earnings after Interest* $1.25 $0.05 $1.0 $0 (Amounts in millions) *Since there are no taxes in this world, an earnings after interest (EAI) is the same as earnings after interest and taxes. Thus, EAI is the income available to the common equity holders. The value of each firm is the sum of the value of its stocks and the value of its bonds. Under the assumption of risk-neutrality, the value of the stock is the PV of the expected earnings available to common stockholders. The value of the bonds is the PV of the expected interest payments. VanSant: Stock: Bonds: Firm: $878,260.870 + $652,173.913 = $1,530,434.783 Matta: Stock: Bonds: Firm: $695,652.174 + $834,782.609 = $1,530,434.783 c. If there are significant costs associated with Matta’s insolvency, then the firms’ values will differ. 16.3 Direct: Legal and administrative costs: Costs associated with the litigation arising from a liquidation or bankruptcy. These costs include lawyers’ fees, courtroom costs and expert witness fees. Indirect: Impaired ability to conduct business: Loss of sale