capitalstructure∶theoptimalfinancialmix(编辑修改稿)

capitalstructure∶theoptimalfinancialmix(编辑修改稿)内容摘要：

With The Rating Constraint. Aswath Damodaran 33 Ratings Constraints for Disney  At its optimal debt ratio of 40%, Disney has an estimated rating of A.  If managers insisted on a AA rating, the optimal debt ratio for Disney is then 30% and the cost of the ratings constraint is fairly small: Cost of AA Rating Constraint = Value at 40% Debt – Value at 30% Debt = $63,651 – $63,596 = $55 million  If managers insisted on a AAA rating, the optimal debt ratio would drop to 20% and the cost of the ratings constraint would rise: Cost of AAA rating constraint = Value at 40% Debt – Value at 20% Debt = $63,651 $62,371 = $1,280 million Aswath Damodaran 34 3. What if you do not buy back stock..  The optimal debt ratio is ultimately a function of the underlying riskiness of the business in which you operate and your tax rate.  Will the optimal be different if you invested in projects instead of buying back stock? • No. As long as the projects financed are in the same business mix that the pany has always been in and your tax rate does not change significantly. • Yes, if the projects are in entirely different types of businesses or if the tax rate is significantly different. Aswath Damodaran 35 The power of the cost of capital approach..  The intuition behind the cost of capital approach is simple. Firms should try to minimize the cost of overall funding that they raise.  The approach is flexible and can be extended easily to • Family group panies (Tata Chemicals) • Companies with volatile earnings (Aracruz Celulose) • Private panies (Bookscape) Aswath Damodaran 36 A. Family Group Companies in emerging markets Issues  Intragroup loans: Companies may lend to other panies within the group at belowmarket rates. In effect, this can skew the cost of debt below the true cost.  Implicit group backing for loans: When a family group pany borrows, the lender may charge it an interest rate, based upon the assumption that the group will back up the payment of the loan. Thus, even risky panies may be able to borrow money at low rates. Bottom line: Rather than think about whether individual panies in a group have the right mix of debt and equity, we may want to consider looking at the entire group’s debt and equity mix. Aswath Damodaran 37 Tata Chemical’s Optimal Capital Structure Actual Optimal Tata Chemical looks like it is over levered (34% actual versus 10% optimal), but it is tough to tell without looking at the rest of the group. Aswath Damodaran 38 B. Volatile Earnings: Aracruz Celulose  Aracruz‟s current US dollar cost of capital %, using an equity risk premium of % for Brazil and the current debt ratio of %: • Current $ Cost of Equity = % + (%) = % • Current $ Cost of Debt = % () = % • Current $ Cost of Capital = % () + % *.5247 = %  The firm reported operating ine of 574 million BR on revenues of 3,696 million R$ in 2020. This was significantly lower than its operating ine of R$ 1,011 million in 2020 and R$ 1,074 million in 2020. Based on it‟s current operating ine, Aracruz has an optimal debt ratio in excess of 0% and looks over levered. Aswath Damodaran 39 Solutions to the “volatile ine” problem  Use normalized ine: Rather than use the operating ine from the most recent year, consider using a number that is more reflective of a normal year: • Average operating ine over a longer period (say 310 years). This works if the last year was an aberration or if the pany operates in a business with long cycles (modity, cyclical). • Operating ine puted for the pany, using the average operating margin of the sector and the revenues of the pany. This works if the firm is under performing the sector, but could be brought up to par with new management.  Use conservative estimate: Compute the optimal debt ratio, based upon the portion of ine that you can count on. Aswath Damodaran 40 Modifying the Cost of Capital Approach for Aracruz  The operating ine at Aracruz is a function of the price of paper and pulp in global markets. We puted Aracruz‟s average pretax operating margin between 2020 and 2020 to be %. Applying this average margin to 2020 revenues of $R 3,697 million generates a normalized operating ine of R$ 1,007 million. We will pute the optimal debt ratio using this normalized value.  In Chapter 4, we noted that Aracruz‟s synthetic rating of BB+, based on the interest coverage ratio, is higher than its actual rating of BB and attributed the difference to Aracruz being a Brazilian pany, exposed to country risk. Because we pute the cost of debt at each level of debt using synthetic ratings, we run the risk of understating the cost of debt. To account for Brazilian country risk, we add the country default spread for Brazil (%) to Aracruz‟s pany default spread in assessing the dollar cost of debt: $ Cost of Debt = US T Bond Rate + Default SpreadCountry+Default SpreadCompany. Aswath Damodaran 41 Aracruz’s Optimal Debt Ratio Aswath Damodaran 42 C. Analyzing a Private Firm  The approach remains the same with important caveats • It is far more difficult estimating firm value, since the equity and the debt of private firms are not traded. • Most private firms are not rated. • If the cost of equity is based upon the market beta, it is possible that we might be overstating the optimal debt ratio, since private firm owners often consider all risk. Aswath Damodaran 43 Bookscape’s current cost of capital  We assumed that Bookscape would have a debt to capital ratio of %, similar to that of publicly traded book panies, and that the tax rate for the firm is 40%. We puted a cost of capital based on that assumption. We also used a total beta of to measure the additional risk that the owner of Bookscape is exposed to because of his lack of diversification. C。