CH20Hybrid Financing Preferred Stock, Leasing, Warrants, and Convertibles(财务管理,英文版)概要1.pptVIP

CHAPTER 20Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles Preferred stock Leasing Warrants Convertibles Recent innovations Leasing Leasing is sometimes referred to as “off balance sheet” financing if a lease is not “capitalized.” In other words, it is not shown on the balance sheet. Leasing is a substitute for debt financing and, thus, uses up a firm’s debt capacity. Capital leases are different from operating leases: Capital leases do not provide for maintenance service. Capital leases are not cancelable. Capital leases are fully amortized. Analysis: Lease vs. Borrow-and-Buy Data: New machine costs $1,200,000. 3-year MACRS class life; 4-year economic life. Tax rate of 40%. kd = 10%. Depreciation Schedule In a lease analysis, what discount rate should cash flows be discounted at? Cost of Owning Analysis(In Thousands) Net Advantage of Leasing Suppose computer’s residual value could be as low as $0 or as high as $250,000, but expected value is $125,000. How could the riskiness of the SV be incorporated in the analysis? What effect would this have on lease decision? What effect would a cancellation clause have on the riskiness of the lease? Preferred dividends are fixed, but they may be omitted without placing the firm in default. Most preferred stocks prohibit the firm from paying common dividends when the preferred is in arrears. Usually cumulative up to a limit. Dividends are indexed to the rate on treasury securities instead of being fixed. Excellent S-T corporate investment: Only 30% of dividends are taxable to corporations. The floating rate generally keeps issue trading near par. However, if the issuer is risky, the floating rate preferred stock may have too much price instability for the liquid asset portfolios of many corporate investors. A warrant is a long-term call option. A convertible consists of a fixed rate bond plus a call option. P0 = $10. kd of 20-year annual payment bond without warrants = 12%. 50 warrants with an ex