Market Timing and capital structure

a profit and loss statement accelerated methodsaccounts payableaccounts payable turnover ratio accounts receivableaccounts receivableaccounts receivable turnover ratios accrrual accountingaccrued expenseaccumulated depreciation accumulated retained earnings acquireaffiliateagency costagency problemagency relationshipaging scheduleallocateallocationally efficient markets amortizationannuityannuity dueanomalyappreciatearbitrage pricing theory(APT)Asian currency optionasset management ratiosasset turnover ratioauthorized sharesautonomyaverage age of accounts receivable avreage rate currency optionbad debt loss ratiobalance sheetbalance sheetbank debtbankers'acceptancebankruptcybasic earnings per shareBaumol cash management model behavioral financebeta coefficientbond indenturebonding costbook valuebottom-up approachbreak-even analysiabrokerage feebusinessbusiness riskcapital asset pricing model(CAPM) capital asset pricing model(CAPM) capital budgetcapital budgetingcapital expenditurecapital leasecapital marketcapital rationingcapital structurecapital surpluscash conversion cyclecash dividendcash dividendscash Flow Coverage Ratiocash flow from financingcash flow from investingcash flow from operationscash offercash ratiocentralize payableschairpersoncheckchief executive officer(CEO)chief financial officer(CFO) chronologicalclaimclearing time floatclosely held corporation coefficientcollateralcommercial papercommon stockcommon stockcommon stockholder or shareholder company-specific factor compensating balancecomplex capital structure compound interestcompoundingconcentration bankingconstant dividend payout ratioconstant growth model consumer creditcontingent value rights controllerconversion premiumconversion ratioconvertible bondconvertible debtconvertible debtconvertible preferred stock convertible securities corporate annual reports correlation coefficientcost of capitalcost of capitalcovariancecreative accountingcredit and collectiong policy credit cardcredit periodcredit salecredit termcreditorcross-currency pooling system cross-currency quote cumulative votingcurrency forward contract currency futures contract currency optioncurrency riskcurrency swapcurrent assetcurrent liabilitycurrent liabilitycurrent market valuecurrent ratiocurrent yielddebt holderdebt instrumentdebt management ratiosdebt ratiodebt-to-equity ratiodebt-to-total-capital decision-makingdeclaration datedefault riskdeferred annuitydeferred taxdepreciatedepreciationdesired or target capital structure diluted earnings per sharedilution of controldilution of ownershipdilutivedirect methoddirect quotationdisbursementdiscount perioddiscount ratediscount ratediscounted cash flow(DCF)discounted payback perioddiscountingdiversifiable riskdiversifydividend discount modeldividend irrelevane theorydividend payoutdividend payout ratiodividend policydividend yielddividend-payout ratiodo-it-yourself dividenddufault riskDuPont Analysis of ROEearnings before interest and taxes (EBI earnings before interest and taxes(EBIT earnings per shareearnings per shareeconomic order quantity(EOQ)efficient market hypothesis（EMH) employee stock option program(ESOP) equity multiplierEuropean Economic AreaEuropean Economic CommunityEuropean unionexchange rateexchange-rate riskex-dividend dateexecutive directorexotic optionexpansion projectexpected returnexpected utility theoryexternal financingface valueFinancial Accounting Standards Board(FA financial analystfinancial distressfinancial distressfinancial economistfinancial flexibilityfinancial leveragefinancial managementfinancial marketfinancial ratiofinancial riskfinancial riskfinancial standardsfinancial statementfinancing cash flowsfinancing mixfinancing mixfinancing mixfirst-in ,first out (FIFO)Fitch Investor Servicesfixed exchange rate systemfloatfloatationfloatation costfloating exchange rate systemFortune 500forward discountforward marketforward premiumforward rateforward tradefree cash flow hypothesisfree tradefree-riding problemfuture contractfuture value(FV)general partnerGenerally Accepted Accounting Principle general-purpose assetsgo publicgoing concernGoldman Sachsgross profit margingrowth perpetuityhedginghistorical costhoard of directorshomemade dividendshurdle ratehurdle ratehybird securityhybridincentive stock optionincome statementincremental cash flows independent auditorindependent projectindirect methodindirect quotationinformation asymmetry informationally efficient markets initial public offering(IPO)initial public offering(IPO)initial public offerings institutional investorinstitutional investorintangible fixed assetsinterest coverage ratiointerest deductioninterest rate parityinterest rate riskinternal financinginternal rate of return(IRR) Internal Revenue Service(IRS) international corporation international financial management international Monetary Fund intrinsic valueinventoryinventoryinventory processing period inventory turnover ratioinvesting cash flowsinvestment bankinvestment bankerinvestor rationlityJanuary effectjeopardizejoint venturejust-in-time(JIT)systemlast-in ,first-out (LIFO)law of one pricelearning curveleaseleaselesseelessorleverage ratioslevered firmliabilitylimited partnerlimited partnershipline of creditliquidating dividendliquidationliquidity ratiolock box systemlong-term debt to total capital ratios long-term liabilitylong-term ratiolookback currency optionlow regular plus specially designated d mail floatmanagenment buyoutmanipulatemarket conversion valuemarket imperfectionmarket riskmarket shareMarketabilitymarketable securitiesmarketable securitiesmarketable securitymarketable securitymarket-to-book value ratioMaster of AccountingMaster of Business Administration(MBA) Master of Financial Managementmaterial requirement planning (MRP)syst maturitymean-variance frontiermean-variance worldMerrill LynchMiller-orr cash management modelmix of debt and equitymoderate approachModigliani and Miller(M&M)theorem Monday effectmoney marketmoney ordermonitoring costsMoody’s and Standard & Poor’sMoody's Investors Service,Inc.(Moody's) Morgan Stanley Dean Wittermortgagemultinational corporationmutual fundmutually exclusive projectnegotiable certificates of deposit(CDs) negotiate offernet incomenet present value(NPV)net present value(NPV)net profit marginnet working capticalNew York Stock Exchange(NYSE)New York Stork Exchangenewly listed companynon-executive directornormal distributionnormality assumptionnote payableoffering priceopen marketoperating cash flowsoperating incomeoperating income(loss)operating leaseoperating leverageoperating profit marginoperating profit marginoperationally efficient markets opportunity costopportunity costoptimal capital structureoption contractoption exchangeoption-like securityordinary annuityoutstandingoutstanding sharesoverheadover-the-counter marketowner’s equityP/E ratiopartnerpartnershippatentpayback period(PP)payment datepecking order theoryperfect capital marketperpetual inventory systemperpetuitypivotalportfolio theorypost-auditpost-earnings announcement drift precautionary motivepreemptive rightpreemptive rightpreferred stockpreferred stockpreferred stockholder or shareholder present value(PV)price takerprimary marketprincipalprincipal-agent or agency relationship private corporationprivate placementprivately held corporationprivileged subscriptionpro rataprobabilityprobability distributionprobability distribution function processing floatprocrastinationprofitprofitabilityprofitability index(PI)profitability ratioproperty dividendproperty,plant,and equipment(PPE)pros and consprospect theoryprotfoliopublic offerpublicly held companypublicly traded corporations publicly traded firmpurchasing power parityput optionput pricequick ratiorandom variablerate of returnrational behaviorreal assetsreal estaterecord dateregular dividendrelaxed or conservative approach replacement projectrepurchaserepurchaserepurchase agreementrequired rate of returnreserve borrowing capacityresidual claimresidual dividend policyresidual valuerestricted or aggressive approach restrictive covenanatsretail incestorretail investorreturnreturn on asset (ROA)return on common equity (ROCE) return on total equity (ROTE) return on total equity ratio (ROE) revenueright to proxyright to transfer ownershipright to voterights offerrisk aversionSalomon Smith Barneysaturation pointscenario analysisseasoned issuesecondary marketSecurities and Exchange Commission(SEC) semi-strong formsensitivity analysissensitivity analysisseparation of ownership and control share repurchaseshareholderside effectsimple capital structuresimple interstsimulationslowing disbursementsocial goodsole proprietorshipsolvencysource of cashspecial-purpose assetsspeculative motivespin-offsspot ratespot tradestable dollar dividend policy stakeholder theorystand-alone riskStandard & Poor's Corporation(S&P) standard deviationstatement of cash flowstatement of change in shareholders' eq statement of retained earningsstock buybackstock dividendsstock offeringstock offeringstock optionstock price appreciationstock repurchasestock splitstockholderstockholders'equitystraight or majority votingstraight-line depreciationstrong formsunk costswapsyndicate of underwritertakeovertangible fixed assetstarget capital structuretax exempt instrumenttax shieldteminal valuetender offertender offer(=takeover bid)term loantime value of moneytotal asset turnover ratiotrade credittrademarktradeofftradeoff theorytransaction costtransaction motivetreasurertreasury notestreasury sharetreasury stockunbiased forward rateunderlying common stockunderpricingunderpricingunderwriterunderwritingunlevered firmunseasoned issueUS Treasury Billuse of cashvalue effectvalue(wealth)maximizationvariable-rate debtvarianceventure capitalventure capitalistviabilityvice president of financevolatilityvolatilityvoting rightwarrantwarrantweak formweighted average cost of capital(WACC) well-beingwindow dressingwithdrawalworking capital management working captical management world Trade Organization yield to maturity (YTM) zero balance account(ZBA)加速折旧法应付账款应付账款周转率应收账款应收账款应收账款周转率应计制会计应计费用累计折旧累计留存收益获得，取得（在财务中有时指购买；名词形式是acquisition，意为收购）分支机构代理成本代理问题代理关系账龄表（资源，权利等)配置（名词形式是allocation，如capital allocation，意为资本配置）配置有效市场摊销年金先付年金异常（人或事物）升值套利定价理论亚式期权资产管理比率资产周转比率授权股自主权，自治应收账款平均账龄均价期权坏账损失率资产负债表资产负债表银行借款银行承兑汇票破产基本每股收益鲍莫尔现金管理模型行为财务贝塔系数债券契约契约成本账面价值盈亏平衡点分析经纪费企业，商务，业务经营风险资本资产定价模型资本资产定价模型资本预算资本预算资本支出融资性租赁资本市场资本限额资本结构资本盈余现金周转期现金股利现金股利现金流量保障比率筹资活动现金流投资活动现金流经营活动现金流现金收购现金比率集中支付主席（chairmanor chairwoman)支票首席执行官首席财务官按时间顺序排列的（根据权力提出）要求，要求权，主张，要求而得到的东西清算浮游量控股公司系数抵押商业票据普通股普通股普通股股东（也可以是ordinary stockholder or shareholder公司特有风险补偿性余额复杂资本结构复利复利计算集中银行法固定股利支付率政策固定增长率模型消费者信用或有价值权会计长转换溢价转换比率可转换债券可转债可转债可转换优先股可转换证券公司年报相关系数资本成本资本成本协方差创造性会计，寻机性会计信用与收款政策信用卡信用期限赊销信用条件债权人外汇交叉组合系统交叉标价累积投票制远期外汇合约货币期货合约货币期权外汇风险货币互换流动资产流动负债流动负债现行市场价值流动比率现行收益债权人（也可以是debtor,creditor)债务工具债务管理比率债务比率债务与权益比率债务与全部资本比率决策，决策的股利宣布日违约风险递延年金递延税款贬值折旧目标资本结构稀释的每股收益控制权稀释所有权稀释（公司股票）冲减每股收益的直接法直接标价支出、支付折扣期限折扣率折现率折现现金流折现回收期折现计算可分散风险多样化股利折现模型股利无关论股利支付率股利支付比率股利政策股利收益率股利支付比率自制股利违约风险权益报酬率的杜邦分析体系息税前盈余息税前盈余每股收益（盈余）每股盈余经济订货量有效市场假设员工股票期权计划权益乘数欧洲经济区协定欧洲经济共同体欧盟汇率汇率风险除息日执行董事特种期权扩充项目期望收益期望效用理论外部融资面值（美国）会计准则委员会财务分析师财务困境财务困境财务经济学家财务灵活性财务杠杆财务管理金融市场财务比率财务风险财务风险（有时也指金融风险）财务准则财务报表筹资现金流融资比率融资结构融资组合（指负债与所有者权益的比例关系）先进先出惠誉国际公司固定汇率制度浮游量、浮差发行证券；挂牌上市上市成本浮动汇率制度财富500指数远期贴水远期市场远期升水远期汇率远期交易自由现金流假说自由贸易搭便车问题期货合约未来值，终值一般合伙人公认会计原则一般目的资产公开上市持续的高盛公司毛利增长年金避险 套期保值历史成本董事会自制股利门坎利率，最低报酬率门槛利率，最低报酬率混合证券混合金融工具激励性股票期权利润表增量现金流量独立审计师独立项目间接法间接标价信息不对称信息有效市场首次公开发行股票首发股票首发股票机构投资者机构投资者无形固定资产利率保障比率利息抵减利率平价利息率风险内部融资内部收益率，内含报酬率美国国内税务署跨国公司国际财务管理国际货币基金组织内在价值存货存货存活周转期存货周转率投资现金流投资银行投资银行家投资者的理性一月效应危害合资企业即时制后进先出单一价格法则学习曲线租赁租赁承租人出租人杠杠比率杠杆企业负债有限责任合伙人有限合伙制企业贷款额度股利清算清算流动性比率锁箱系统长期债务与全部资本比率长期负债长期比率回顾试货币期权低正常股利加额外股利政策邮寄浮游量管理层收购操纵市场转换价值市场不完备性市场风险市场份额可销售性短期证券有价证券短期有价证券流动性证券，有价证券市场价值与账面价值的比率会计学硕士工商管理硕士财务管理专业硕士物料需求计划系统（债券、票据等）到期均值-方差有效边界均值-方差世界美林公司米勒-欧尔现金管理模型负债与股票的组合适中策略MM定理星期一效应拨款单，汇款单，汇票监督成本穆迪和标准普尔穆迪公司摩根士丹利-添惠公司抵押跨国公司共同基金互不相容项目大额可转让存单议价收购净利润净现值净现值净利润净营运资本纽约证券交易市场纽约股票交易所新上市公司非执行董事正态分布正态假设应付票据发行价格公开市场经营现金流经营收益经营收益（损失）经营性租赁经营杠杆经营利润市场价值比率运营有效市场机会成本机会成本最优资本结构期权合约期权交易类期权证券普通年金（证券等）发行在外的发行股制造费用场外交易市场所有者权益市盈率合伙制企业专利回收期股利支付日排序理论完美资本市场（存货）永续盘存制永续年金关键的，枢纽的组合理论期后审计期后盈余披露预防动机优先权优先认购权优先股优先股优先股股东（英国人用preference stockholder or shareholder)现值价格接受者一级市场本金委托-代理关系（代理关系）私募公司，未上市公司私募私人控股公司有特权的认购按比例，成比例概率概率分布概率分布函数内部处理浮游量延迟利润盈利能力现值指数盈利比率财产股利土地、厂房与设备正反两方面期望理论组合公开发行公众控股公司公开上市公司，公众公司，上市公司（其他的表达法如，listed corporation，public corporation，etc）公开上市公司购买力平价卖出期权卖出价格速动比率随机变量收益率理性行为实务资产房地产（有时也用real property,或者就用property表示）股权登记日正常股利稳健策略更新项目回购回购回购协议要求的报酬率保留借款能力剩余索取权剩余股利政策残余价值激进策略限制性条款散户投资者（为自己买卖证券而不是为任何公司或机构进行投资的个人投资者）个人投资者.散户投资者回报资产收益率普通权益报酬率全部权益报酬率权益报酬率收入代理权所有权转移权投票权认股权发行风险规避所罗门美邦投资公司饱和点情况分析适时发行、增发（seasoned是指新股稳定发行。

(Difficulty: E = Easy, M = Medium, and T = Tough)1. The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company’s stock price and minimizes the firm’s W ACC.2.An increase in the corporate tax rate and a decrease in the company’s degree of operating leverage/business risk will encourage a company to use more debt in its capital structure.3.you are replacing high cost equity with low cost debt. When there is very little debt in the capital structure, the WACC will actually decrease.Multiple Choice: ConceptualEasy:Business risk Answer: c Diff: E 1. A decrease in the debt ratio will generally have no effect on.a. Financial risk.b. Total risk.c. Business risk.d. Market risk.e. N one of the above is correct. (It will affect each type of risk above.) Business risk Answer: d Diff: E 2. Business risk is concerned with the operations of the firm. Which of thefollowing is not associated with (or not a part of) business risk?a. Demand variability.b. Sales price variability.c. The extent to which operating costs are fixed.d. Changes in required returns due to financing decisions.e. The ability to change prices as costs change.Business risk Answer: d Diff: E N3. Which of the following factors would affect a company’s business risk?a. The level of uncertainty regarding the demand for its product.b. The degree of operating leverage.c. The amount of debt in its capital structure.d. Statements a and b are correct.e. All of the statements above are correct.Chapter 13- Page 1Business and financial risk Answer: d Diff: E4. Which of the following statements is most correct?a. A firm’s business risk is solely determined by the financi alcharacteristics of its industry.b. The factors that affect a firm’s business risk are determined partly byindustry characteristics and partly by economic conditions.Unfortunately, these and other factors that affect a firm’s businessrisk are not subject to any degree of managerial control.c. One of the benefits to a firm of being at or near its target capitalstructure is that financial flexibility becomes much less important.d. The firm’s financial risk may have both market risk and diversifiablerisk components.e. None of the statements above is correct.Optimal capital structure Answer: e Diff: E5. Which of the following statements is most correct?a. As a rule, the optimal capital structure is found by determining thedebt-equity mix that maximizes expected EPS.b. The optimal capital structure simultaneously maximizes EPS andminimizes the WACC.c. The optimal capital structure minimizes the cost of equity, which is anecessary condition for maximizing the stock price.d. T he optimal capital structure simultaneously minimizes the cost of debt,the cost of equity, and the WACC.e. None of the statements above is correct.Optimal capital structure Answer: c Diff: E 6. From the information below, select the optimal capital structure for MinnowEntertainment Company.a. Debt = 40%; Equity = 60%; EPS = $2.95; Stock price = $26.50.b. Debt = 50%; Equity = 50%; EPS = $3.05; Stock price = $28.90.c. Debt = 60%; Equity = 40%; EPS = $3.18; Stock price = $31.20.d. Debt = 80%; Equity = 20%; EPS = $3.42; Stock price = $30.40.e. Debt = 70%; Equity = 30%; EPS = $3.31; Stock price = $30.00.Optimal capital structure Answer: e Diff: E 7. Which of the following statements best describes the optimal capitalstructure?a. The optimal capital structure is the mix of debt, equity, and preferredstock that maximizes the company’s earnings per share (EPS).b. The optimal capital structure is the mix of debt, equity, and preferredstock that maximizes the company’s stock price.c. The optimal capital structure is the mix of debt, equity, and preferredstock that minimizes the company’s weighted average cost of capital(WACC).d. Statements a and b are correct.e. Statements b and c are correct.Chapter 13 - Page 28. The firm’s target cap ital structure is consistent with which of thefollowing?a. Maximum earnings per share (EPS).b. Minimum cost of debt (k d).c. Minimum risk.d. Minimum cost of equity (k s).e. Minimum weighted average cost of capital (WACC).Leverage and capital structure Answer: d Diff: E 9. Which of the following is likely to encourage a company to use more debt inits capital structure?a. An increase in the corporate tax rate.b. An increase in the personal tax rate.c. A decrease in the company’s degree of operati ng leverage.d. Statements a and c are correct.e. All of the statements above are correct.Leverage and capital structure Answer: e Diff: E10. Which of the following statements is most correct?a. A reduction in the corporate tax rate is likely to increase the debtratio of the average corporation.b. An increase in the personal tax rate is likely to increase the debtratio of the average corporation.c. If changes in the bankruptcy code make bankruptcy less costly tocorporations, then this would likely reduce the debt ratio of theaverage corporation.d. All of the statements above are correct.e. None of the statements above is correct.Leverage and capital structure Answer: e Diff: E 11. Which of the following statements is likely to encourage a firm to increaseits debt ratio in its capital structure?a. Its sales become less stable over time.b. Its corporate tax rate declines.c. Management believes that the firm’s stock is overvalued.d. Statements a and b are correct.e. None of the statements above is correct.Leverage and capital structure Answer: a Diff: E 12. Which of the following factors is likely to encourage a corporation toincrease the proportion of debt in its capital structure?a. An increase in the corporate tax rate.b. An increase in the personal tax rate.c. An increase in the company’s degree of operating leverage.d. The company’s assets become less liquid.e. An increase in expected bankruptcy costs.Chapter 13- Page 313. Which of the following would increase the likelihood that a company wouldincrease its debt ratio in its capital structure?a. An increase in costs incurred when filing for bankruptcy.b. An increase in the corporate tax rate.c. An increase in the personal tax rate.d. A decre ase in the firm’s business risk.e. Statements b and d are correct.Leverage and capital structure Answer: a Diff: E N 14. Which of the following factors is likely to encourage a company to increaseits debt ratio?a. An increase in the corporate tax rate.b. An increase in the personal tax rate.c. Its assets become less liquid.d. Both statements a and c are correct.e. All of the statements above are correct.Leverage and capital structure Answer: c Diff: E N 15. Jones Co. currently is 100 percent equity financed. The company isconsidering changing its capital structure. More specifically, Jones’ CFO is considering a recapitalization plan in which the firm would issue long-term debt with a yield of 9 percent and use the proceeds to repurchase comm on stock. The recapitalization would not change the company’s total assets nor would it affect the company’s basic earning power, which is currently 15 percent. The CFO estimates that the recapitalization will reduce the company’s WACC and increase its s tock price. Which of the following is also likely to occur if the company goes ahead with the planned recapitalization?a. The company’s net income will increase.b. The company’s earnings per share will decrease.c. The company’s cost of equity will inc rease.d. The company’s ROA will increase.e. The company’s ROE will decrease.Leverage and capital structure Answer: e Diff: E N16. Which of the following statements is most correct?a. When a company increases its debt ratio, the costs of both equity anddebt capital increase. Therefore, the weighted average cost of capital(WACC) must also increase.b. The capital structure that maximizes stock price is generally thecapital structure that also maximizes earnings per share.c. Since debt financing is cheaper than equity financing, increasing acompany’s debt ratio will always reduce the company’s WACC.d. The capital structure that maximizes stock price is generally thecapital structure that also maximizes the company’s WACC.e. None of the statements above is correct.Chapter 13 - Page 417. Which of the following statements is most correct?a. When a company increases its debt ratio, the costs of equity and debtcapital both increase. Therefore, the weighted average cost of capital(WACC) must also increase.b. The capital structure that maximizes stock price is generally thecapital structure that also maximizes earnings per share.c. All else equal, an increase in the corporate tax rate would tend toencourage a company to increase its debt ratio.d. Statements a and b are correct.e. Statements a and c are correct.Capital structure and WACC Answer: e Diff: E18. Which of the following statements is most correct?a. Since debt financing raises the firm’s financial risk, increasing acompany’s debt ratio will always increase the company’s WACC.b. Since debt financing is cheaper than equity financing, increasing acompany’s debt ratio will always reduce the company’s WACC.c. Increasing a company’s debt ratio will ty pically reduce the marginalcosts of both debt and equity financing; however, it still may raisethe company’s WACC.d. Statements a and c are correct.e. None of the statements above is correct.Capital structure, ROA, and ROE Answer: d Diff: E 19. Ridgefield Enterprises has total assets of $300 million. The companycurrently has no debt in its capital structure. The company’s basic earning power is 15 percent. The company is contemplating a recapitalization where it will issue debt at 10 percent and use the proceeds to buy back shares of the company’s common stock. If the company proceeds with the recapitali-zation its operating income, total assets, and tax rate will remain the same.Which of the following will occur as a result of the recapitalization?a. The company’s ROA will decline.b. The company’s ROE will increase.c. The company’s basic earning power will decline.d. Statements a and b are correct.e. All of the statements above are correct.Capital structure, WACC, TIE, and EPS Answer: a Diff: E20. Which of the following statements is most correct?a. The capital structure that maximizes stock price is also the capitalstructure that minimizes the weighted average cost of capital (WACC).b. The capital structure that maximizes stock price is also the capitalstructure that maximizes earnings per share.c. The capital structure that maximizes stock price is also the capitalstructure that maximizes the firm’s times interest earned (TIE) ratio.d. Statements a and b are correct.e. Statements b and c are correct.Chapter 13- Page 5Capital structure theory Answer: d Diff: E 21. Which of the following statements about capital structure theory is mostcorrect?a. Signaling theory suggests firms should in normal times maintain reserveborrowing capacity that can be used if an especially good investmentopportunity comes along.b. In general, an increase in the corporate tax rate would cause firms touse less debt in their capital structures.c. According to the “trade-off theory,” an increase in the costs ofbankruptcy would lead firms to reduce the amount of debt in theircapital structures.d. Statements a and c are correct.e. All of the statements above are correct.Miscellaneous capital structure concepts Answer: c Diff: E N22. Which of the following statements is most correct?a. If Congress were to pass legislation that increases the personal taxrate, but decreases the corporate tax rate, this would encouragecompanies to increase their debt ratios.b. If a company were to issue debt and use the money to repurchase commonstock, this action would have no impact on the company’s return onassets. (Assume that the repurchase has no impact on the company’soperating income.)c. If a company were to issue debt and use the money to increase assets,this acti on would increase the company’s return on equity. (Assume thatthe company’s return on assets remains unchanged.)d. Statements a and b are correct.e. Statements b and c are correct.Financial leverage and EPS Answer: a Diff: E 23. Volga Publishing is considering a proposed increase in its debt ratio,which will also increase the company’s interest expense. The plan would involve the company issuing new bonds and using the proceeds to buy back shares of its common stock. The company’s CFO expects that t he plan will not change the company’s total assets or operating income. How-ever, the company’s CFO does estimate that it will increase the company’s earnings per share (EPS). Assuming the CFO’s estimates are correct, which of the following statements is most correct?a. Since the proposed plan increases Volga’s financial risk, the company’sstock price still might fall even though its EPS is expected toincrease.b. If the plan reduces the company’s WACC, the company’s stock price isalso likely to decline.c. Since the plan is expected to increase EPS, this implies that netincome is also expected to increase.d. Statements a and b are correct.e. Statements a and c are correct.Chapter 13 - Page 6Financial leverage and EPS Answer: c Diff: E24. Which of the following statements is most correct?a. Increasing financial leverage is one way to increase a firm’s basicearning power (BEP).b. Firms with lower fixed costs tend to have greater operating leverage.c. The debt ratio that maximizes EPS generally exceeds the debt ratio thatmaximizes share price.d. Statements a and b are correct.e. Statements a and c are correct.Financial leverage and ratios Answer: d Diff: E 25. Company A and Company B have the same tax rate, the same total assets, andthe same basic earning power. Both companies have a basic earning power that exceeds their before-tax costs of debt, k d. However, Company A has a higher debt ratio and higher interest expense than Company B. Which of the following statements is most correct?a. Company A has a lower net income than B.b. Company A has a lower ROA than B.c. Company A has a lower ROE than B.d. Statements a and b are correct.e. None of the statements above is correct.Financial leverage and ratios Answer: b Diff: E 26.Firm U and Firm L each have the same total assets. Both firms also have abasic earning power of 20 percent. Firm U is 100 percent equity financed, while Firm L is financed with 50 percent debt and 50 percent equity. Firm L’s debt has a before-tax cost of 8 percent. Both firms have positive net income. Which of the following statements is most correct?a. The two companies have the same times interest earned (TIE) ratio.b. Firm L has a lower ROA than Firm U.c. Firm L has a lower ROE than Firm U.d. Statements a and b are correct.e. Statements b and c are correct.Medium:Optimal capital structure Answer: d Diff: M27. As a general rule, the capital structure thata. Maximizes expected EPS also maximizes the price per share of commonstock.b. Minimizes the interest rate on debt also maximizes the expected EPS.c. Minimizes the required rate on equity also maximizes the stock price.d. Maximizes the price per share of common stock also minimizes theweighted average cost of capital.e. None of the statements above is correct.Chapter 13- Page 7Operating and financial leverage Answer: e Diff: M28. Which of the following statements is most correct?a. Firms whose sales are very sensitive to changes in the business cycleare more likely to rely on debt financing.b. Firms with large tax loss carry forwards are more likely to rely ondebt financing.c. Firms with a high operating leverage are more likely to rely on debtfinancing.d. Statements a and c are correct.e. None of the statements above is correct.Financial leverage and ratios Answer: c Diff: M 29. Company A and Company B have the same total assets, operating income (EBIT),tax rate, and business risk. Company A, however, has a much higher debt ratio than Company B. Company A’s basic earning power (BEP) exceeds its cost of debt financing (k d). Which of the following statements is most correct?a. Company A has a higher return on assets (ROA) than Company B.b. Company A has a higher times interest earned (TIE) ratio than Company B.c. Company A has a higher return on equity (ROE) than Company B, and itsrisk, as measured by the standard deviation of ROE, is also higher thanCompany B’s.d. Statements b and c are correct.e. All of the statements above are correct.Limits of leverage Answer: d Diff: M 30. Which of the following are practical difficulties associated with capitalstructure and degree of leverage analyses?a. It is nearly impossible to determine exactly how P/E ratios or equitycapitalization rates (k s values) are affected by different degrees offinancial leverage.b. Managers’ attitudes toward risk differ and some managers may set atarget capital structure other than the one that would maximize stockprice.c. Managers often have a responsibility to provide continuous service;they must preserve the long-run viability of the enterprise. Thus, thegoal of employing leverage to maximize short-run stock price andminimize capital cost may conflict with long-run viability.d. All of the statements above are correct.e. None of the statements above represents a serious impediment to thepractical application of leverage analysis in capital structuredetermination.Chapter 13 - Page 8Signaling theory Answer: b Diff: M 31. If you know that your firm is facing relatively poor prospects but needsnew capital, and you know that investors do not have this information, signaling theory would predict that you woulda. Issue debt to maintain the returns of equity holders.b. Issue equity to share the burden of decreased equity returns betweenold and new shareholders.c. Be indifferent between issuing debt and equity.d. P ostpone going into capital markets until your firm’s prospects improve.e. Convey your inside information to investors using the media toeliminate the information asymmetry.Capital structure and WACC Answer: d Diff: M32. Which of the following statements is most correct?a. The optimal capital structure minimizes the WACC.b. If the after-tax cost of equity financing exceeds the after-tax cost ofdebt financing, firms are always able to reduce their WACC byincreasing the amount of debt in their capital structure.c. Increasing the amount of debt in a firm’s capital structure is likelyto increase the costs of both debt and equity financing.d. Statements a and c are correct.e. Statements b and c are correct.Capital structure and WACC Answer: b Diff: M33. Which of the following statements is most correct?a. A firm can use retained earnings without paying a flotation cost.Therefore, while the cost of retained earnings is not zero, the cost ofretained earnings is generally lower than the after-tax cost of debtfinancing.b. The capital structure that minimizes the firm’s weighted average costof capital is also the capital structure that maximizes the firm’sstock price.c. The capital structure that minimizes the firm’s weighted average costof capital is also the capital structure that maximizes the firm’searnings per share.d. If a firm finds that the cost of debt financing is currently less thanthe cost of equity financing, an increase in its debt ratio will alwaysreduce its weighted average cost of capital.e. Statements a and b are correct.Chapter 13- Page 9Miscellaneous capital structure concepts Answer: a Diff: M34. Which of the following statements is most correct?a. In general, a firm with low operating leverage has a small proportionof its total costs in the form of fixed costs.b. An increase in the personal tax rate would not affect firms’ capitalstructure decisions.c. A firm with high business risk is more likely to increase its use offinancial leverage than a firm with low business risk, assuming allelse equal.d. Statements a and b are correct.e. All of the statements above are correct.Miscellaneous capital structure concepts Answer: c Diff: M35. Which of the following statements is correct?a. “Business risk” is differentiated from “financial risk” by the factthat financial risk reflects only the use of debt, while business riskreflects both the use of debt and such factors as sales variability,cost variability, and operating leverage.b. If corporate tax rates were decreased while other things were heldconstant, and if the Modigliani-Miller tax-adjusted tradeoff theory ofcapital structure were correct, this would tend to cause corporationsto increase their use of debt.c. If corporate tax rates were decreased while other things were heldconstant, and if the Modigliani-Miller tax-adjusted tradeoff theory ofcapital structure were correct, this would tend to cause corporationsto decrease their use of debt.d. The optimal capital structure is the one that simultaneously(1) maximizes the price of the firm’s stock, (2) minimizes its WACC,and (3) maximizes its EPS.e. None of the statements above is correct.Tough:Variations in capital structures Answer: d Diff: T36. Which of the following is correct?a. Generally, debt to total assets ratios do not vary much among differentindustries although they do vary for firms within a particular industry.b. Utilities generally have very high common equity ratios due to theirneed for vast amounts of equity-supported capital.c. The drug industry has a high debt to common equity ratio because theirearnings are very stable and thus, can support the large interest costsassociated with higher debt levels.d. Wide variations in capital structures exist between industries and alsobetween individual firms within industries and are influenced by uniquefirm factors including managerial attitudes.e. Since most stocks sell at or around their book values, using accountingvalues provides an accurate picture of a fir m’s capital structure.Chapter 13 - Page 10Multiple Choice: ProblemsEasy:Determining price from EBIT Answer: e Diff: E 37. The Price Company will produce 55,000 widgets next year. Variable costswill equal 40 percent of sales, while fixed costs will total $110,000. At what price must each widget be sold for the company to achieve an EBIT of $95,000?a. $2.00b. $4.45c. $5.00d. $5.37e. $6.21Breakeven price Answer: a Diff: E 38. Texas Products Inc. has a division that makes burlap bags for the citrusindustry. The division has fixed costs of $10,000 per month, and it expects to sell 42,000 bags per month. If the variable cost per bag is $2.00, what price must the division charge in order to break even?a. $2.24b. $2.47c. $2.82d. $3.15e. $2.00Medium:New financing Answer: a Diff: M 39. The Altman Company has a debt ratio of 33.33 percent, and it needs to raise$100,000 to expand. Management feels that an optimal debt ratio would be16.67 percent. Sales are currently $750,000, and the total assets turnoveris 7.5. How should the expansion be financed so as to produce the desired debt ratio?a. 100% equityb. 100% debtc. 20 percent debt, 80 percent equityd. 40 percent debt, 60 percent equitye. 50 percent debt, 50 percent equityChapter 13- Page 11Net operating income Answer: b Diff: M 40. The Congress Company has identified two methods for producing playingcards. One method involves using a machine having a fixed cost of $10,000 and variable costs of $1.00 per deck of cards. The other method would use a less expensive machine (fixed cost = $5,000), but it would require greater variable costs ($1.50 per deck of cards). If the selling price per deck of cards will be the same under each method, at what level of output will the two methods produce the same net operating income?a. 5,000 decksb. 10,000 decksc. 15,000 decksd. 20,000 deckse. 25,000 decksChange in breakeven volume Answer: b Diff: M 41. Hensley Corporation uses breakeven analysis to study the effects ofexpansion projects it considers. Currently, the fi rm’s plastic bag business segment has fixed costs of $120,000, while its unit price per carton is $1.20 and its variable unit cost is $0.60. The firm is considering a new bag machine and an automatic carton folder as modifications to its existing production lines. With the expansion, fixed costs would rise to $240,000, but variable cost would drop to $0.41 per unit. One key benefit is that Hensley can lower its wholesale price to its distributors to $1.05 per carton (that is, its selling price), and this would likely more than double its market share, as it will become the lowest cost producer. What is the change in the breakeven volume with the proposed project?a. 100,000 unitsb. 175,000 unitsc. 75,000 unitsd. 200,000 unitse. 0 unitsBreakeven and expansion Answer: c Diff: M 42. Martin Corporation currently sells 180,000 units per year at a price of$7.00 per unit; its variable cost is $4.20 per unit; and fixed costs are $400,000. Martin is considering expanding into two additional states, which would increase its fixed costs to $650,000 and would increase its variable unit cost to an average of $4.48 per unit. If Martin expands, it expects to sell 270,000 units at $7.00 per unit. By how much will Martin’s breakeven sales dollar level change?a. $ 183,333b. $ 456,500c. $ 805,556d. $ 910,667e. $1,200,000Chapter 13 - Page 12Breakeven Answer: d Diff: M 43. Elephant Books sells paperback books for $7 each. The variable cost perbook is $5. At current annual sales of 200,000 books, the publisher is j ust breaking even. It is estimated that if the authors’ royalties are reduced, the variable cost per book will drop by $1. Assume authors’ royalties are reduced and sales remain constant; how much more money can the publisher put into advertising (a fixed cost) and still break even?a. $600,000b. $466,667c. $333,333d. $200,000e. $175,225Operating decision Answer: d Diff: M 44. Musgrave Corporation has fixed costs of $46,000 and variable costs that are30 percent of the current sales price of $2.15. At a price of $2.15,Musgrave sells 40,000 units. Musgrave can increase sales by 10,000 units by cutting its unit price from $2.15 to $1.95, but variable cost per unit won’t change. Should it cut its price?a. No, EBIT decreases by $6,000.b. No, EBIT decreases by $250.c. Yes, EBIT increases by $11,500.d. Yes, EBIT increases by $8,050.e. Yes, EBIT increases by $5,050.Capital structure and stock price Answer: c Diff: M 45. The following information applies to Lott Enterprises:Operating income (EBIT) $300,000 Shares outstanding 120,000 Debt $100,000 EPS $1.45 Interest expense $ 10,000 Stock price $17.40 Tax rate 40%The company is considering a recapitalization where it would issue $348,000 worth of new debt and use the proceeds to buy back $348,000 worth of common stock. The buyback will be undertaken at the pre-recapitalization share price ($17.40). The recapitalization is not expected to have an effect on operating income or the tax rate. After the recapitalization, the company’s interest expense will be $50,000.Assume that the recapitalization has no effect on the company’s price earnings (P/E) ratio. What is the expected price of the company’s stock following the recapitalization?a. $15.30b. $17.75c. $18.00d. $19.03e. $20.48Chapter 13- Page 13。

《证券投资学》英文词汇实物资产real assets金融资产financial assets资产负债表balance sheet现金流量表statement of cash flows损益表income statement会计收入accounting earnings帐面价值book value流动比率current ratio速动比率quick ratio酸性测试比率acid test ratio资产周转率asset turnover (ATO)应收帐款平均收款期或应收天数average collection period or day’s receivvables 积极管理active management积极型资产组合active portfolio美式期权、欧式期权American depository \ European depository看涨期权call option看跌期权put option套利arbitrage套利定价理论arbitrage pricing theory资产配置决策asset allocation decision资本配置决策capital allocation decision银行贴现收益率bank discount yield银行承兑汇票banker’s acceptance基差basis基差风险basis risk二叉树模型binomial model布莱克舒尔斯顶界公式Black-Scholes formula大宗交易block transactions普通股common stock优先股preferred stock债券bond面值par value公司债券corporate bonds可赎回债券callable bond可卖回债券put bond可转换债券convertible bond信用债券或无担保债券debenture or unsecured bond现金/债券选择cash \ bond selection经纪人市场brokered market佣金经纪人commission broker牛市、熊市bullish \ bearish经济周期business cycle赎回保护期call protection资本利得capital gains资本市场capital market资本市场线capital market line (CML)现金交割cash delivery现金等价物cash equivalents清算所clearinghouse交易所exchanges股票交易所stock exchanges场外交易市场over-the-counter market抵押品collateral有担保的抵押债务collateralized mortgage obligation封闭型（共同）基金closed-end (mutual) fund整个资产组合complete portfolio固定增长模型constant growth model或有债权contingent claim交叉持股cross holdings经常项目current account衍生资产derivative asset衍生证券derivative security红利折现模型discounted dividend model (DDM)红利支付率dividend payout ratio可分散风险diversifiable risk分散化diversification有效分散化efficient diversification道氏理论Dow theory久期duration有效率边界efficient frontier欧洲美元Eurodollars超额收益excess return名义利率nominal interest rate真实利率real interest rate实际复利realized compound yield汇率exchange rate汇率风险exchange rate risk(利率的)预期假定expectations hypothesis (of interest rates) 预期收益expected return面值face value因素模型factor model金融资产financial assets金融中介financial intermediary财政政策fiscal policy固定收益证券fixed-income security浮动利率债券floating-rate bond外汇市场foreign exchange market外汇互换foreign exchange swap利率互换interest rate swap远期合约forward contract远期利率forward interest rate期货合约futures contract期货期权futures option期货价格futures price基本面分析fundamental analysis套期保值hedging持有期收益holding-period return指数模型index model指数期权index option通货膨胀inflation首次公开发行initial public offering内部信息inside information内幕交易insider trading清偿价值liquidation value(企业的)内在价值intrinsic value（of a firm）期权的内在价值intrinsic value of an option投资银行investment bankers投资级债券investment-grade bond垃圾债券junk bond投资组合investment portfolio一价定律law of one price流动性liquidity流动偏好理论liquidity preference theory流动性溢价liquidity premium市场或系统风险market or systematic risk非系统风险nonsystematic risk交易所的会员或席位membership or seat on a exchange 最小方差边界minimum-variance frontier最小方差资产组合minimum-variance portfolio最优风险资产组合optimal risky portfolio现代资产组合理论modern portfolio theory (MPT)资产组合管理portfolio management货币政策monetary policy货币市场money market抵押担保证券mortgage-backed security转手证券pass-through security单因素模型single-factor model单指数模型single-index model多因素CAPM模型multifactor CAPM共同基金mutual fund开放型基金open-end fund纳斯达克Nasdaq消极投资策略passive investment strategy 消极管理passive management消极型资产组合passive portfolio消极策略passive strategy波峰peak市盈率price-earnings ratio市盈率效应P/E effect公司利润再投资率plowback ratio溢价premium原生证券primitive security衍生证券derivative security一级市场primary market二级市场secondary market本金principal利润率profit margin公开发行public offering私募private placement随机漫步random walk资产收益率return on assets (ROA)股本收益率return on equity (ROE)销售收益率return on sales (ROS)风险套利risk arbitrage风险厌恶risk-averse风险中性risk-neutral风险偏好者risk lover无风险资产risk-free asset无风险收益率risk-free rate风险溢价risk premium风险资产risk asset证券化securitization证券分析security analysis证券市场线security market line证券选择security selection有效市场假定efficient market hypothesis 强有效市场假定strong-form EMH半强有效市场假定semistrong-form EMH弱有效市场假定weak- form EMH资产分割separation property短期利率short interest rate空头头寸short position套期hedge卖空short sale投机speculation投机级债券speculative-grade bong即期利率spot rate股票选择上stock selection股票拆分stock split止损指令stop-loss order对敲straddle技术分析technical analysis基本分析利率期限结构term structure of interest rate时间价值time value三级市场third market国库券treasury bill中长期国债treasury bond or note承销underwriting波动性风险volatility risk认股权证warrant周末效应weekend effect充分分散化的资产组合well-diversified portfolio 收益率曲线yield curve到期收益率yield to maturity零息票债券zero-coupon bond零投资组合zero-investment portfolio欢迎您的下载，资料仅供参考！致力为企业和个人提供合同协议，策划案计划书，学习资料等等打造全网一站式需求。

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Optimal Capital Structure: Reflections on economic and other valuesBy Marc Schauten & Jaap Spronk11. IntroductionDespite a vast literature on the capital structure of the firm (see Harris and Raviv, 1991, Graham and Harvey, 2001, Brav et al., 2005, for overviews) there still is a big gap between theory and practice (see e.g. Cools, 1993, Tempelaar, 1991, Boot & Cools, 1997). Starting with the seminal work by Modigliani & Miller (1958, 1963), much attention has been paid to the optimality of capital structure from the shareholders’ point of view.Over the last few decades studies have been produced on the effect of other stakeholders’interests on capital structure. Well-known examples are the interests of customers who receive product or service guarantees from the company (see e.g. Grinblatt & Titman, 2002). Another area that has received considerable attention is the relation between managerial incentives and capital structure (Ibid.). Furthermore, the issue of corporate control2 (see Jensen & Ruback, 1983) and, related, the issue of corporate governance3 (see Shleifer & Vishney, 1997), receive a lion’s part of the more recent academic attention for capital structure decisions.From all these studies, one thing is clear: The capital structure decision (or rather, the management of the capital structure over time) involves more issues than the maximization of the firm’s market value alone. In this paper, we give an overview of the different objectives and considerations that have been proposed in the literature. We make a distinction between two broadly defined situations. The first is the traditional case of the firm that strives for the maximization of the value of the shares for the current shareholders. Whenever other considerations than value maximization enter capital structure decisions, these considerations have to be instrumental to the goal of value maximization. The second case concerns the firm that explicitly chooses for more objectives than value maximization alone. This may be because the shareholders adopt a multiple stakeholders approach or because of a different ownership structure than the usual corporate structure dominating finance literature. An example of the latter is the co-operation, a legal entity which can be found in a.o. many European countries. For a discussion on why firms are facing multiple goals, we refer to Hallerbach and Spronk (2002a, 2002b).In Section 2 we will describe objectives and considerations that, directly or indirectly, clearly help to create and maintain a capital structure which is 'optimal' for the value maximizing firm. The third section describes other objectives and considerations. Some of these may have a clear negative effect on economic value, others may be neutral and in some cases the effect on economic value is not always completely clear. Section 4 shows how, for both cases, capital structure decisions can be framed as multiple criteria decision problems which can then benefit from multiple criteria decision support tools that are now widely available.2. Maximizing shareholder valueAccording to the neoclassical view on the role of the firm, the firm has one single objective: maximization of shareholder value. Shareholders possess the property rights of the firm and are thus entitled to decide what the firm should aim for. Since shareholders only have oneobjective in mind - wealth maximization - the goal of the firm is maximization of the firm's contribution to the financial wealth of its shareholders. The firm can accomplish this by investing in projects with positive net present value4. Part of shareholder value is determined by the corporate financing decision5. Two theories about the capital structure of the firm - the trade-off theory and the pecking order theory - assume shareholder wealth maximization as the one and only corporate objective. We will discuss both theories including several market value related extensions. Based on this discussion we formulate a list of criteria that is relevant for the corporate financing decision in this essentially neoclassical view.The original proposition I of Miller and Modigliani (1958) states that in a perfect capital market the equilibrium market value of a firm is independent of its capital structure, i.e. the debt-equity ratio6. If proposition I does not hold then arbitrage will take place. Investors will buy shares of the undervalued firm and sell shares of the overvalued shares in such a way that identical income streams are obtained. As investors exploit these arbitrage opportunities, the price of the overvalued shares will fall and that of the undervalued shares will rise, until both prices are equal.When corporate taxes are introduced, proposition I changes dramatically. Miller and Modigliani (1958, 1963) show that in a world with corporate tax the value of firms is a.o. a function of leverage. When interest payments become tax deductible and payments to shareholders are not, the capital structure that maximizes firm value involves a hundred percent debt financing. By increasing leverage, the payments to the government are reduced with a higher cash flow for the providers of capital as a result. The difference between the present value of the taxes paid by an unlevered firm (G u ) and an identical levered firm (G l ) is the present value of tax shields (PVTS). Figure 1 depicts the total value of an unlevered and a levered firm7. The higher leverage, the lower G l , the higher G u - G l(=PVTS). In the traditional trade-off models of optimal capital structure it is assumed that firms balance the marginal present value of interest tax shields8 against marginal direct costs of financial distress or direct bankruptcy costs.9 Additional factors can be included in this trade-off framework. Other costs than direct costs of financial distress are agency costs of debt (Jensen & Meckling, 1976). Often cited examples of agency costs of debt are the underinvestment problem (Myers, 1977)10, the asset substitution problem (Jensen & Meckling, 1976 and Galai & Masulis, 1976), the 'play for time' game by managers, the 'unexpected increase of leverage (combined with an equivalent pay out to stockholders to make to increase the impact)', the 'refusal to contribute equity capital' and the 'cash in and run' game (Brealey, Myers & Allan, 2006). These problems are caused by the difference of interest between equity and debt holders and could be seen as part of the indirect costs of financial distress. Another benefit of debt is the reduction of agency costs between managers and external equity (Jensen and Meckling, 1976, Jensen, 1986, 1989). Jensen en Meckling (1976) argue that debt, by allowing larger managerial residual claims because the need for external equity is reduced by the use of debt, increases managerial effort to work. In addition, Jensen (1986) argues that high leverage reduces free cash with less resources to waste on unprofitable investments as a result.11 The agency costs between management and external equity are often left out the trade-off theory since it assumes managers not acting on behalf of the shareholders (only)which is an assumption of the traditional trade-off theory.In Myers' (1984) and Myers and Majluf's (1984) pecking order model12 there is no optimal capital structure. Instead, because of asymmetric information and signalling problems associated with external financing13, firm's financing policies follow a hierarchy, with a preference for internal over external finance, and for debt over equity. A strict interpretation of this model suggests that firms do not aim at a target debt ratio. Instead, the debt ratio is just the cumulative result of hierarchical financing over time. (See Shyum-Sunder & Myers, 1999.) Original examples of signalling models are the models of Ross (1977) and Leland and Pyle (1977). Ross (1977) suggests that higher financial leverage can be used by managers to signal an optimistic future for the firm and that these signals cannot be mimicked by unsuccessful firms14. Leland and Pyle (1977) focus on owners instead of managers. They assume that entrepreneurs have better information on the expected cash flows than outsiders have. The inside information held by an entrepreneur can be transferred to suppliers of capital because it is in the owner's interest to invest a greater fraction of his wealth in successful projects. Thus the owner's willingness to invest in his own projects can serve as a signal of project quality. The value of the firm increases with the percentage of equity held by the entrepreneur relative to the percentage he would have held in case of a lower quality project. (Copeland, Weston & Shastri, 2005.)The stakeholder theory formulated by Grinblatt & Titman (2002)15 suggests that the way in which a firm and its non-financial stakeholders interact is an important determinant of the firm's optimal capital structure. Non-financial stakeholders are those parties other than the debt and equity holders. Non-financial stakeholders include firm's customers, employees, suppliers and the overall community in which the firm operates. These stakeholders can be hurt by a firm's financial difficulties. For example customers may receive inferior products that are difficult to service, suppliers may lose business, employees may lose jobs and the economy can be disrupted. Because of the costs they potentially bear in the event of a firm's financial distress, non-financial stakeholders will be less interested ceteris paribus in doing business with a firm having a high(er) potential for financial difficulties. This understandable reluctance to do business with a distressed firm creates a cost that can deter a firm from undertaking excessive debt financing even when lenders are willing to provide it on favorable terms (Ibid., p. 598). These considerations by non-financial stakeholders are the cause of their importance as determinant for the capital structure. This stakeholder theory could be seen as part of the trade-off theory (see Brealey, Myers and Allen, 2006, p.481, although the term 'stakeholder theory' is not mentioned) since these stakeholders influence the indirect costs of financial distress.16As the trade-off theory (excluding agency costs between managers and shareholders) and the pecking order theory, the stakeholder theory of Grinblatt and Titman (2002) assumes shareholder wealth maximization as the single corporate objective.17Based on these theories, a huge number of empirical studies have been produced. See e.g. Harris & Raviv (1991) for a systematic overview of this literature18. More recent studies are e.g. Shyum-Sunder & Myers (1999), testing the trade-off theory against the pecking order theory, Kemsley & Nissim (2002) estimating the present value of tax shield, Andrade & Kaplan (1998) estimating the costs of financial distress and Rajan & Zingales (1995) investigating the determinants of capital structure in the G-7 countries. Rajan & Zingales(1995)19 explain differences in leverage of individual firms with firm characteristics. In their study leverage is a function of tangibility of assets, market to book ratio, firm size and profitability. Barclay & Smith (1995) provide an empirical examination of the determinants of corporate debt maturity. Graham & Harvey (2001) survey 392 CFOs about a.o. capital structure. We come back to this Graham & Harvey study in Section 3.20Cross sectional studies as by Titman and Wessels (1988), Rajan & Zingales (1995) and Barclay & Smith (1995) and Wald (1999) model capital structure mainly in terms of leverage and then leverage as a function of different firm (and market) characteristics as suggested by capital structure theory21. We do the opposite. We do not analyze the effect of several firm characteristics on capital structure (c.q. leverage), but we analyze the effect of capital structure on variables that co-determine shareholder value. In several decisions, including capital structure decisions, these variables may get the role of decision criteria. Criteria which are related to the trade-off and pecking order theory are listed in Table 1. We will discuss these criteria in more detail in section 4. Figure 2 illustrates the basic idea of our approach.3. Other objectives and considerationsA lot of evidence suggests that managers act not only in the interest of the shareholders (see Myers, 2001). Neither the static trade-off theory nor the pecking order theory can fully explain differences in capital structure. Myers (2001, p.82) states that 'Yet even 40 years after the Modigliani and Miller research, our understanding of these firms22 financing choices is limited.' Results of several surveys (see Cools 1993, Graham & Harvey, 2001, Brounen et al., 2004) reveal that CFOs do not pay a lot of attention to variables relevant in these shareholder wealth maximizing theories. Given the results of empirical research, this does not come as a surprise.The survey by Graham and Harvey finds only moderate evidence for the trade-off theory. Around 70% have a flexible target or a somewhat tight target or range. Only 10% have a strict target ratio. Around 20% of the firms declare not to have an optimal or target debt-equity ratio at all.In general, the corporate tax advantage seems only moderately important in capital structure decisions. The tax advantage of debt is most important for large regulated and dividend paying firms. Further, favorable foreign tax treatment relative to the US is fairly important in issuing foreign debt decisions23. Little evidence is found that personal taxes influence the capital structure24. In general potential costs of financial distress seem not very important although credit ratings are. According to Graham and Harvey this last finding could be viewed as (an indirect) indication of concern with distress. Earnings volatility also seems to be a determinant of leverage, which is consistent with the prediction that firms reduce leverage when the probability of bankruptcy is high. Firms do not declare directly that (the present value of the expected) costs of financial distress are an important determinant of capital structure, although indirect evidence seems to exist. Graham and Harvey find little evidence that firms discipline managers by increasing leverage. Graham and Harvey explicitly note that ‘1) managers might be unwilling to admit to using debt in this manner, or 2) perhaps a low rating on this question reflects an unwillingness of firms to adopt Jensen’s solution more than a weakness in Jensen’s argument'.The most important issue affecting corporate debt decisions is management’s desire for financial flexibility (excess cash or preservation of debt capacity). Furthermore, managers arereluctant to issue common stock when they perceive the market is undervalued (most CFOs think their shares are undervalued). Because asymmetric information variables have no power to predict the issue of new debt or equity, Harvey and Graham conclude that the pecking order model is not the true model of the security choice25.The fact that neoclassical models do not (fully) explain financial behavior could be explained in several ways. First, it could be that managers do strive for creating shareholder value but at the same time also pay attention to variables other than the variables listed in Table 1. Variables of which managers think that they are (justifiably or not) relevant for creating shareholder value. Second, it could be that managers do not (only) serve the interest of the shareholders but of other stakeholders as well26. As a result, managers integrate variables that are relevant for them and or other stakeholders in the process of managing the firm's capital structure. The impact of these variables on the financing decision is not per definition negative for shareholder value. For example if ‘value of financial rewards for managers’ is one the goals that is maximized by managers – which may not be excluded – and if the rewards of managers consists of a large fraction of call options, managers could decide to increase leverage (and pay out an excess amount of cash, if any) to lever the volatility of the shares with an increase in the value of the options as a result. The increase of leverage could have a positive effect on shareholder wealth (e.g. the agency costs between equity and management could be lower) but the criterion 'value of financial rewards' could (but does not have to) be leading. Third, shareholders themselves do possibly have other goals than shareholder wealth creation alone. Fourth, managers rely on certain (different) rules of thumb or heuristics that do not harm shareholder value but can not be explained by neoclassical models either27. Fifth, the neoclassical models are not complete or not tested correctly (see e.g. Shyum-Sunder & Myers, 1999).Either way, we do expect variables other than those founded in the neoclassical property rights view are or should be included explicitly in the financing decision framework. To determine which variables should be included we probably need other views or theories of the firm than the neoclassical alone. Zingales (2000) argues that ‘…corporate finance theory, empirical research, practical implications, and policy recommendations are deeply rooted in an underlying theory of the firm.’ (Ibid., p. 1623.) Examples of attempts of new theories are 'the stakeholder theory of the firm' (see e.g. Donaldson and Preston, 1995), 'the enlightened stakeholder theory' as a response (see Jensen, 2001), 'the organizational theory' (see Myers, 1993, 2000, 2001) and the stakeholder equity model (see Soppe, 2006).We introduce an organizational balance sheet which is based on the organizational theory of Myers (1993). The intention is to offer a framework to enhance a discussion about criteria that could be relevant for the different stakeholders of the firm. In Myers' organizational theory employees (including managers) are included as stakeholders; we integrate other stakeholders as suppliers, customers and the community as well. Figure 3 presents the adjusted organizational balance sheet.Pre-tax value is the maximum value of the firm including the maximum value of the present value of all stakeholders' surplus. The present value of the stakeholders' surplus (ES plus OTS) is the present value of future costs of perks, overstaffing, above market prices for inputs (including above market wages), above market services provided to customers and the community etc.28 Depending on the theory of the firm, the pre-tax value can be distributedamong the different stakeholders following certain 'rules'. Note that what we call 'surplus' in this framework is still based on the 'property rights' principle of the firm. Second, only distributions in market values are reflected in this balance sheet. Neutral mutations are not29. Based on the results of Graham and Harvey (2001) and common sense we formulate a list of criteria or heuristics that could be integrated into the financing decision framework. Some criteria lead to neutral mutations others do not. We call these criteria 'quasi non-economic criteria'. Non-economic, because the criteria are not based on the neoclassical view. Quasi, because the relations with economic value are not always clear cut. We include criteria that lead to neutral mutations as well, because managers might have good reasons that we overlook or are relevant for other reasons than financial wealth.The broadest decision framework we propose in this paper is the one that includes both the economic and quasi non-economic variables. Figure 4 illustrates the idea. The additional quasi non-economic variables are listed in Table 2. This list is far from complete.flexibility could be relevant for at least employees and the suppliers of resources needed for these projects. As long as managers only would invest in zero net present value projects this variable would have no value effect in the organizational balance sheet. But if it influences the value of the sum of the projects undertaken this will be reflected in this balance sheet. Of course, financial flexibility is also valued for economic reasons, see Section 2 and 4.The probability of bankruptcy influences job security for employees and the duration of a 'profitable' relationship with the firm for suppliers, customers and possibly the community. For managers (and other stakeholders without diversified portfolios) the probability of default could be important. The cost of bankruptcy is for them possibly much higher than for shareholders with diversified portfolios. As with financial flexibility, the probability of default influences shareholder value as well. In Section 2 and 4 we discuss this variable in relation to shareholder value. Here the variable is relevant, because it has an effect on the wealth or other 'valued' variables of stakeholders other than equity (and debt) holders. We assume owner-managers dislike sharing control of their firms with others. For that reason, debt financing could possibly have non-economic advantages for these managers. After all, common stock carries voting rights while debt does not. Owner-managers might prefer debt over new equity to keep control over the firm. Control is relevant in the economic framework as well, see Section 2 and 4.In practice, earnings dilution is an important variable effecting the financing decision. Whether it is a neutral mutations variable or not30, the effect of the financing decision on the earnings per share is often of some importance. If a reduction in the earnings per share (EPS) is considered to be a bad signal, managers try to prevent such a reduction. Thus the effect on EPS becomes an economic variable. As long as it is a neutral mutation variable, or if it is relevant for other reasons we treat EPS as a quasi non-economic variable.The reward package could be relevant for employees. If the financing decision influences the value of this package this variable will be one of the relevant criteria for the manager. If it is possible to increase the value of this package, the influence on shareholder value is ceteris paribus negative. If the reward package motivates the manager to create extra shareholder value compared with the situation without the package, this would possibly more than offset this negative financing effect.优化资本结构：思考经济和其他价值By Marc Schauten & Jaap Spronk11。