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Debt Policy Doesn’t Matter(英文版)(ppt 60页)

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Debt Policy Doesn’t Matter(英文版)(ppt 60页)内容简介
Debt Policy Doesn’t Matter(英文版)内容提要:
M&M (Debt Policy Doesn’t Matter)
Assumptions
By issuing 1 security rather than 2, company diminishes investor choice.  This does not reduce value if:
Investors do not need choice, OR
There are sufficient alternative securities
Capital structure does not affect cash flows e.g...
No taxes
No bankruptcy costs
No effect on management incentives
C.S. & Corporate Taxes:
Example - You own all the equity of Space Babies Diaper Co.. The company has no debt.  The company’s annual cash flow is $1,000, before interest and taxes. The corporate tax rate is 40%.   You have the option to exchange 1/2 of your equity position for 10% bonds with a face value of $1,000.
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