ch20 Hybrid Financing 财务管理基础课件

higher and leasing becomes even more
attractive.
20-10
What if a cancellation clause were included in the lease? How would this affect the riskiness of the lease? A cancellation clause lowers the risk of the lease to the lessee. However, it increases the risk to the lessor.
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.
Current stock price (P0) = $10. kd of equivalent 20-year annual
payment bonds without warrants = 12%. 50 warrants attached to each bond with an exercise price of $12.50. Each warrant’s value will be $1.50.
Preferred dividends are cumulative up to a limit.
Most preferred stocks prohibit the firm from paying common dividends when the preferred is in arrears.
INPUTS
20
12 -925
1000
N
I/YR PV PMT FV
OUTPUT
110
20-17
If after the issue, the warrants sell for $2.50 each, what would this imply about the value of the package?
The package would have been worth $925 + 50(2.50) = $1,050. This is $50 more than the actual selling price.
Cost of Owning Analysis
Analysis in thousands:0来自123
4
Cost of asset (1,200.0)
Dep. tax savings1
158.4 216.0 72.0 33.6
Maint. (AT)2
(15.0) (15.0) (15.0) (15.0)
20-15
What coupon rate should be set for this bond plus warrants package?
Step 1 – Calculate the value of the bonds in the package
VPackage = VBond + VWarrants = $1,000. VWarrants = 50($1.50) = $75. VBond + $75 = $1,000
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.
CHAPTER 20
Hybrid Financing:
Preferred Stock, Leasing, Warrants, and Convertibles
Preferred stock Leasing Warrants Convertibles
20-1
Leasing
Often referred to as “off balance sheet” financing if a lease is not “capitalized.”
0
1
2
3
4
A-T Lease pmt
-204 -204 -204 -204
Each lease payment of $340 is deductible, so the after-tax cost of the lease is (1-T)($340) = -$204.
PV cost of leasing (@6%) = -$749.294.
Res. value (AT)3 ______ _____ _____ _____ 75.0
Net cash flow (1,215.0) 143.4 201.0 57.0 108.6
PV cost of owning (@ 6%) = -$766.948.
20-6
Notes on Cost of Owning Analysis
beginning of each year. Residual value in Year 4 of $125,000. 4-year lease includes maintenance. Lease payment is $340,000/year, payable at
beginning of each year.
20-11
How does preferred stock differ from common equity and debt?
Preferred dividends are fixed, but they may be omitted without placing the firm in default.
20-3
Depreciation schedule
Depreciable basis = $1,200,000
MACRS Year Rate
1 0.33 2 0.45 3 0.15 4 0.07
1.00
Depreciation Expense
$ 396,000 540,000 180,000 84,000
20-8
Net advantage of leasing
NAL = PV cost of owning – PV cost of leasing NAL = $766.948 - $749.294
= $17.654 (Dollars in thousands) Since the cost of owning outweighs the cost
20-12
What is floating rate preferred?
Dividends are indexed to the rate on treasury securities instead of being fixed.
Excellent S-T corporate investment:
20-13
How can a knowledge of call options help one understand warrants and convertibles? A warrant is a long-term call option. A convertible bond consists of a
VBond = $925.
20-16
Calculating required annual coupon rate for bond with warrants package
Step 2 – Find coupon payment and rate.
Solving for PMT, we have a solution of $110, which corresponds to an annual coupon rate of $110 / $1,000 = 11%.
$1,200,000
End-of-Year Book Value
$804,000 264,000 84,000 0
20-4
In a lease analysis, at what discount rate should cash flows be discounted?
▪ Since cash flows in a lease analysis are evaluated on an after-tax basis, we should use the after-tax cost of borrowing.
▪ Previously, we were told the cost of debt, kd, was 10%. Therefore, we should discount cash flows at 6%. A-T kd = 10%(1 – T) = 10%(1 – 0.4) = 6%.
20-5
of leasing, the firm should lease.
20-9
Suppose there is a great deal of uncertainty regarding the computer’s residual value
Residual value could range from $0 to $250,000 and has an expected value of $125,000.
Capital leases are not cancelable. Capital leases are fully amortized.
20-2
Analysis: Lease vs. Borrowand-buy
Data: New computer costs $1,200,000. 3-year MACRS class life; 4-year economic life. Tax rate = 40%. kd = 10%. Maintenance of $25,000/year, payable at
To account for the risk introduced by an uncertain residual value, a higher discount rate should be used to discount the residual value.
Therefore, the cost of owning would be
3. The ending book value is $0 so the full $125 salvage (residual) value is taxed, (1 - T)($125) = $75.0.
20-7
Cost of Leasing Analysis
Analysis in thousands:
fixed rate bond plus a call option.
20-14
A firm wants to issue a bond with warrants package at a face value of $1,000. Here are the details of the issue.
1. Depreciation is a tax deductible expense, so it produces a tax savings of T(Depreciation). Year 1 = 0.4($396) = $158.4.
2. Each maintenance payment of $25 is deductible so the after-tax cost of the lease is (1 – T)($25) = $15.