北京大学-公司金融14.pdf

Lecture 9 Capital Structure • We simplify the analysis by considering only common stock and common debt in this lecture. • The capital structure decision is about how much to be financed by debt and how much to be financed by equity. The capital structure decision we consider is the decision to rely on debt. 1 The Pie Theory “Better make it six, I am not that hungry for eight” Yogi Berry, after being asked if he wanted his pizza in six or eight slices. The pie is the sum of the financial claims of the firm, debt and equity in this case. We define the value of the firm to be this sum. Hence the value of the firm V , is V B S ≡ + Where B is the market value of the debt and S is the market value of the equity. • If the goal of the management of the firm is to make the firm as valuable as possible, then the firm should pick the debt equity ratio that makes the pie—the total value—as big as possible. • This lecture is trying to answer the following two questions: (1) Why should the stockholders in the firm care about maximizing the value of the entire firm (2) What is the ratio of debt to equity that maximizes the shareholders’ interests 2 Maximizing Firm Value versus Maximizing Stockholder Interests • The answer to the first question is that changes in capital structure benefit the stockholders if and only if the value of the firm increases. Conversely, these changes hurt the stockholders if and only if the value of the firm decreases. • The following example illustrates that the capital structure that maximizes the value of the firm is the one that financial managers should choose for the shareholders. Example 1: Suppose the market value of the J.J.Sprint Company is $1,000. The company currently has no debt, and each of J.J. Sprint’s 100 shares of