Acf 302
Acf 302
Acf 302
Useful tips:
For this report you will mainly use material from Lecture 3.
The paper by Rajan and Zingales (1995) provides some useful information
on how to measure leverage.
Report 2
For this report you will mainly use material from Lectures 4, 7 and 8.
Look at the benefits of debt, for example:
What marginal tax rate does the firm face?
Are there other tax deductions that this company has (like depreciation) to reduce the
tax?
Does your company have high free cash flows?
Has it taken and does it continue to have good investment projects?
Will there be an advantage to using debt in this firm as a way of keeping managers in line
or do other (cheaper) mechanisms exist?
Look at the costs of debt, for example:
How high are the current cash flows of the firm (to service the debt) and how stable are
these cash flows (look at the variability in the operating income over time)?
How important is bankruptcy cost?
How easy is it for bondholders to observe what equity investors are doing?
Are the assets tangible or intangible?
Are there any bond covenants?
How much does your firm value flexibility?
Report 3
Useful tips:
For this report you will mainly use material from Lectures 9 to 13.
You can use beta from the spreadsheet provided in LUVLE.