台湾大学：《财务管理》（英文版） Chapter 13 An Overview of Corporate Financing

Fundamentals of Corporate Finance Third edition Chapter 13 An Overview Brealey Myers Marcus of Corporate Financing ndamentals of Corporate Finan Brealey Myers Marcus slides by Matthew will IrwinMcGraw-Hill CThe McGraw-Hill Companies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 1 Irwin/McGraw-Hill Chapter 13 Fundamentals of Corporate Finance Third Edition An Overview of Corporate Financing Brealey Myers Marcus slides by Matthew Will Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc.,2001

13-2 Topics Covered COmmon stock PReferred Stock COrporate Debt cOnvertible securities PAtterns of Corporate Financing Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 2 Irwin/McGraw-Hill Topics Covered Common Stock Preferred Stock Corporate Debt Convertible Securities Patterns of Corporate Financing

13-3 Common stock Treasury Stock Stock that has been repurchased by the company and held in its treasury Issued shares Shares that have been issued by the company Outstanding Shares Shares that have been issued by the company and by investors held by Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 3 Irwin/McGraw-Hill Common Stock Treasury Stock Stock that has been repurchased by the company and held in its treasury Issued Shares Shares that have been issued by the company. Outstanding Shares Shares that have been issued by the company and held by investors

13-4 Common stock Authorized Share Capital Maximum number of shares that the company is permitted to issue, as specified in the firms articles of incorporation Par value Retained earnings Value of security Earnings not paid out shown on certificate as dividends Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 4 Irwin/McGraw-Hill Common Stock Authorized Share Capital Maximum number of shares that the company is permitted to issue, as specified in the firm’s articles of incorporation. Par Value Value of security shown on certificate. Retained Earnings Earnings not paid out as dividends

13-5 Common stock Book Value vs Market Value Book value is a backward looking measure. It tells us how much capital the firm has raised from shareholders in the past. It does not measure the value that shareholders place on those shares today. The market value of the firm is forward looking, it depends on the future dividends that shareholders expect to receive Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 5 Irwin/McGraw-Hill Common Stock Book Value vs. Market Value Book value is a backward looking measure. It tells us how much capital the firm has raised from shareholders in the past. It does not measure the value that shareholders place on those shares today. The market value of the firm is forward looking, it depends on the future dividends that shareholders expect to receive

13-6 Common stock Example -H.J. Heinz book value vs Market Value(4/99) Total Shares outstanding=358 million Common Shares($.25 par) 108 Additional paid in capital 278 Retained earnings 4.380 Treasury shares at cost -2,435 Accumulate d losses 527 Net common equity(Book Value) 1, 803 Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 6 Irwin/McGraw-Hill Common Stock Example - H.J. Heinz Book Value vs. Market Value (4/99) Total Shares outstanding = 358 million Net common equity (Book Value) 1,803 Accumulate d losses - 527 Treasury shares at cost - 2,435 Retained earnings 4,380 Additional paid in capital 278 Common Shares ($.25 par) 108

13-7 Common stock Example -H.J. Heinz book value vs Market Value(4/99) Total Shares outstanding=358 million April 1999 Market price $49/sh of shares X358 Market Value $17.5 billion Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 7 Irwin/McGraw-Hill Common Stock Example - H.J. Heinz Book Value vs. Market Value (4/99) Total Shares outstanding = 358 million Market Value $17.5 billion # of shares x 358 April 1999 Market price = $49/sh

13-8 Common stock Example-No-name News can be established by investing $10 million in a printing press. The newspaper is expected to generate a cash flow of $2 million a year for 20 years If the cost of capital is 10 percent, Is the firms market or book value greater Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 8 Irwin/McGraw-Hill Common Stock Example - No-name News can be established by investing $10 million in a printing press. The newspaper is expected to generate a cash flow of $2 million a year for 20 years. If the cost of capital is 10 percent, is the firm’s market or book value greater?

13-9 Common stock Example-No-name News Book value=$10 mil(equipment cost) Market value 2( 10(1+.10)20 =$1703mil Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 9 Irwin/McGraw-Hill Common Stock Example - No-name News ( ) Book Value = $10 mil (equipment cost) Market Value = 2 - = $17.03 mil 1 .10 1 .10(1+.10) 20

13-10 Preferred stock Preferred Stock- Stock that takes priority over common stock in regards to dividends Net worth - Book value of common shareholder's equity plus preferred stock Floating-Rate Preferred - Preferred stock paying dividends that vary with short term interest rates Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 13- 10 Irwin/McGraw-Hill Preferred Stock Preferred Stock - Stock that takes priority over common stock in regards to dividends. Net Worth - Book value of common shareholder’s equity plus preferred stock. Floating-Rate Preferred - Preferred stock paying dividends that vary with short term interest rates