Long term financing Chapter 12: 2,5,8,13,15 Chapter 13: 6,8,16,23 Chapter 14: 1,3,9,11 Chapter 20: 6,12,16.

Slides:

Advertisements

Similar presentations

CAPITAL MARKETS PRESENTED BY ANWAR MISBAH SOUBRA, Phd.

Advertisements

Session 7: Defining and estimating the cost of debt

Chapter 15 Debt Financing.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Long-Term Liabilities: Bonds and Notes 12.

Chapter 16 Long-Term Debt Long-term Debt Apart from raising capital from shareholders, start-up firms may borrow money from banks. When the firms become.

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Cost of Capital Problems

Stock Valuation 05/03/06. Differences between equity and debt Unlike bondholders and other credit holders, holders of equity capital are owners of the.

1 © 1999 by Robert F. Halsey Stockholders’ Equity In this section we will review: ¶ The nature of Stockholders’ Equity – The characteristics of the corporate.

© 2009 South Western, a division of Cengage Learning 1 Chapter 10:SECURITIES MARKETS Trading Financial Resources.

Prof. Ian Giddy New York University Structured Finance: Equity.

Jacoby, Stangeland and Wajeeh, Warrants Similar to long-term call options Differences: –Issued by the corporation –Holders can purchase new shares.

* * Chapter Nineteen Using Securities Markets for Financing and Investing Opportunities Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights.

1 Chapter 14 - Bonds A promise to repay a sum of money on a fixed date, together with interest, usually over the life of the loan Why buy bonds? –Steady.

Session 5: Long-Term Financing C Corporate Finance Topics.

Session 5: Long-Term Financing C Corporate Finance Topics.

CONVERTIBLE SECURITIES CHAPTER FOURTEEN Practical Investment Management Robert A. Strong.

 An Overview of Corporate Financing Chapter 14. Topics Covered  Patterns of Corporate Financing  Common Stock  Preferred Stock  Debt  Derivatives.

Common and Preferred Stock Financing

Convertibles, Warrants, and Derivatives

OPTIONS AND CORPORATE SECURITIES Chapter 25. Chapter Outline Options: The Basics Option Payoffs Employee Stock Options Equity as a Call Option on the.

Chapter 3 Financial Instruments MGT 3412 Fall 2013 University of Lethbridge.

Bond Basics 1 Dr. Craig Ruff Department of Finance J. Mack Robinson College of Business Georgia State University © 2014 Craig Ruff.

Session 6: Estimating cost of debt, debt ratios and cost of capital

7 Fixed-Income Securities: Characteristics and Valuation ©2006 Thomson/South-Western.

Chapter 14: Investing in Stocks and Bonds

Long-Term Financing. Basics of Long-Term Financing.

Chapter 20 Hybrid financing: preferred stock, warrants, & convertibles

Common and Preferred Stock Financing

Hybrid Financing Advanced Corporate Finance FINC week 6.

Chapter 13 Fundamentals of Corporate Finance Fourth Edition An Overview of Corporate Financing Slides by Matthew Will Irwin/McGraw Hill Copyright © 2003.

Investing 101. Lesson Objectives Identify a security Calculate interest/ coupon/ dividend payments Identify different types of securities Describe the.

Financing a Business Chapter 16 Chapter 16 Financing a Business

14-0 Cost of Capital Chapter 14 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

Chapter McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Convertibles, Warrants, and Derivatives 19.

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

1 18. Financing & Investing through Securities Markets Part 1.

INVESTMENT BANKING LESSON 12 APPLYING INVESTMENT BANKING TO FIXED INCOME Investment Banking (2 nd edition) Beijing Language and Culture University Press,

20-1 CHAPTER 20 Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles Preferred stock Leasing Warrants Convertibles.

Chapter 14: Investing in Stocks and Bonds. Objectives Describe stocks and bonds and how they are used by corporations and investors. Define everyday terms.

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Financial Securities CHAPTER 2.

Chapter 2 Financial Securities. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Classes of Financial Assets Financial assets.

25-0 Warrants 25.6 A security that gives the holder the right to purchase shares of stock at a fixed price over a given period of time It is basically.

 An Overview of Corporate Financing Principles of Corporate Finance Brealey and Myers Sixth Edition Slides by Matthew Will Chapter 14 © The McGraw-Hill.

Financial Management and the Securities Market 12 Chapter © 2004 by Nelson, a division of Thomson Canada Limited.

Logic – the study of argumentsarguments "the tool for distinguishing between the true and the false;“ "the Science, as well as the Art, of reasoning” inductive.

14- 1 Fundamentals of Corporate Finance Sixth Edition Richard A. Brealey Stewart C. Myers Alan J. Marcus Slides by Matthew Will Chapter 14 McGraw Hill/Irwin.

An Overview of Corporate Financing

Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/Irwin Cost of Capital Cost of Capital - The return the firm’s.

Bond Issuer (Borrower) Trustee Bond Holder (Lender or Investor) General Public Financial Intermediary Corporation or Government Bond Certificates are exchanged.

Session 6: Estimating cost of debt, debt ratios and cost of capital

SESSION 6: ESTIMATING COST OF DEBT, DEBT RATIOS AND COST OF CAPITAL ‹#› Aswath Damodaran 1.

©2009 McGraw-Hill Ryerson Limited 1 of Derivative Securities Prepared by: Michel Paquet SAIT Polytechnic ©2009 McGraw-Hill Ryerson Limited.

Concept of Valuation Valuation of Different Types of Securities Calculation Of expected Market Value.

Chapter 15 Debt Financing. Chapter Outline 15.1 Corporate Debt 15.2 Bond Covenants 15.3 Repayment Provisions.

1 FINC3131 Business Finance Chapter 10: The Cost of Capital.

4-1 Business Finance (MGT 232) Lecture Stock Valuation.

Chapter 14 Principles PrinciplesofCorporateFinance Tenth Edition An Overview of Corporate Financing Slides by Matthew Will Copyright © 2010 by The McGraw-Hill.

DEVRY FIN 516 Week 4 Midterm Check this A+ tutorial guideline at For more classes visit.

Fixed-Income Securities: Characteristics and Valuation

Chapter 15 Debt Financing 1.

Corporate bonds 1.

19 Chapter Convertibles, Warrants and Derivatives.

Corporate Debt & Credit Risk

Business Finance Michael Dimond.

Investment Alternatives

Financing a Business Chapter 16 Chapter 16 Financing a Business

Investment Alternatives

Financial Management: Theory and Practice 14e

Presentation transcript:

Long term financing Chapter 12: 2,5,8,13,15 Chapter 13: 6,8,16,23 Chapter 14: 1,3,9,11 Chapter 20: 6,12,16

Characteristics of stock vs. debt Debt vs. Equity –Residual claim? –Payments are tax deductible? –Finite life? –Voting rights? Hybrid securities (preferred)

Characteristics of debt securities Security Seniority Callable Convertible Covenants Credit rating

Example: Estimating debt ratios (MV) with complex capital structures Kmart is trying to estimate its debt ratio. It has 1 million shares outstanding, trading at $50 per share, and $250 million in straight debt outstanding (with a yield ot maturity of 9%). It also has two other securities outstanding: 1) it has 200,000 warrants outstanding, conferring on ints holders the right to buy stock at $65 per share. These warrants are trading at $12 each. 2) It also has 10, year convertible bonds outstanding, with a coupon rate of 6% and 10 years to maturity. These bonds trade at par. Estimate the debt ratio in market value terms.

Example: Value of convertible bonds At the end of 2003, GM had an 8.25% convertible bond, coming due in the year 2011, which was trading at $1400. It also had straight bonds, with the same maturity, trading in December 2003 at a yield of 8.4%. What is the value of the conversion option?

Corporate bond yield spreads