All Questions
Tagged with corporate-finance debt
8 questions
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Why would a company file for bankruptcy now when it can always do so later?
Taking FTX as an example, I know they took depositors' funds, send them to SBF's other company Alameda Research which then made risky crypto investments and failed.
This made FTX hold less assets than ...
- 2,351
2
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2
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41
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Effect of tax on required return on debt (and equity)
Debt financing has a tax advantage over equity financing, as the borrower gets reimbursed the tax on interest payments and other debt-servicing costs. Thus
$$
R_{\text{WACC}}=\frac{E}{E+D}R_E+(1-T_C)\...
- 2,611
2
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Cost of debt: How to adjust YTM for the possibility of bankruptcy?
When calculating the weighted average cost of capital (WACC), it may be tempting to use the debt yield (yield to maturity, YTM) as the cost of debt. However, Berk & DeMarzo note in Chapter 12 of &...
- 2,611
2
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WACC: forward looking vs. backward looking
I have learned from the thread "Cost of debt, taxes and WACC" that WACC is forward looking in that it disregards the interest rate on debt already taken by the firm but rather use debt's ...
- 2,611
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Cost of debt, taxes and WACC
I am studying the cost of debt. Without loss of generality, suppose the debt consists of bonds. On the one hand, some textbooks (e.g. Hillier et al. "Fundamentals of Corporate Finance: 4th ...
- 2,611
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Why might it make sense to buy bonds in a company facing restructuring?
In this video, Sal Khan states, "If you really thought that Lehman Brothers in the long term was going to come back, what you might want to do is somehow try to become one of its bondholders, and ...
2
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2
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115
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Does a private company that is 100% financed by a bank loan have a WACC equal to the interest rate?
When estimating a company's Cost of Debt for a Weighted Average Cost of Capital (WACC) calculation we normally look into its bond yield. But for a private company with 100% debt capital structure, ...
- 237
1
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Is the shareholder-creditor conflict the same as debt-equity conflict?
I am having some problems understanding the difference between shareholder-creditor conflict and debt-equity conflict.
I understand what the shareholder-creditor conflict is about, but when I try to ...
- 113