Showing papers on "Capital structure published in 1968"

Financial Management and Policy

Abstract: I. FOUNDATIONS OF FINANCE. Vignette: Problems at Gillette. 1. Goals and Functions of Finance. 2. Concepts in Valuation. 3. Market Risk and Returns. 4. Multivariable and Factor Valuation. 5. Option Valuation. II. INVESTMENT IN ASSETS AND REQUIRED RETURNS. Case: Fazio Pump Corporation. 6. Principles of Capital Investment. 7. Risk and Real Options in Capital Budgeting. 8. Creating Value through Required Returns. Case: National Foods Corporation. III. FINANCING AND DIVIDEND POLICIES. Case: Restructuring the Capital Structure at Marriott. 9. Theory of Capital Structure. 10. Making Capital Structure Decisions. 11. Dividends and Share Repurchase: Theory and Practice. IV. TOOLS OF FINANCIAL ANALYSIS AND CONTROL. Case: Morley Industries, Inc. 12. Financial Ratio Analysis. 13. Financial Planning. V. LIQUIDITY AND WORKING CAPITAL MANAGEMENT. Case: Caceres Semilla S.A. de C.V. 14. Liquidity, Cash, and Marketable Securities. 15. Management of Accounts Receivable and Inventories. 16. Liability Management and Short/Medium Term Financing. VI. CAPITAL MARKET FINANCING AND RISK MANAGEMENT. Case: Dougall & Gilligan Global Agency. 17. Foundations for Longer-Term Financing. 18. Lease Financing. 19. Issuing Securities. 20. Fixed-Income Financing and Pension Liability. 21. Hybrid Financing through Equity-Linked Securities. 22. Managing Financial Risk. VII. EXPANSION AND CONTRACTION. Case: Rayovac Corporation. 23. Mergers and the Market for Corporate Control. 24. Corporate and Distress Restructuring. 25. International Financial Management. Appendix: Present-Value Tables and Normal Probability Distribution Table.

The Impact of Managerial Ability and Capital Structure on Growth of the Farm Firm

Abstract: A simulation model of farm firm behavior in a dynamic environment with elements of uncertainty was developed. The decision maker's formulation of expectations regarding future prices and yields, his selection of alternative farm plans, evaluation of the expected outcomes of the plans with respect to four goals, and implementation of the plan offering the highest level of overall satisfaction are explicitly considered. The expectations, goals, and resource position of the firm are adjusted to reflect the outcome of the particular plan implemented, and the process is repeated for the next year. A case was simulated for a period of 20 years under three different levels of managerial ability and 27 different capital market structures. It is concluded that managerial ability and long-term loan limits are the major factors, among those considered, influencing farm firm growth.

The capital structure and the cost of capital: a suggested exposition*

Abstract: The basic proposition of the theory of the firm's finance is the capital structure theorem, which specifies the relationship between the firm's capital structure and its cost of capital. From this theorem follow the other propositions concerning the relationship between the firm's investment and dividend policy, and its cost of capital and market value. The capital structure theorem has been the subject of controversy ever since the publication in 1958 of Modigliani and Miller's classic paper [7]. While the traditional theory of finance claims that the cost of capital is a U-shaped function of the capital structure, the M & M version of the theorem asserts that in a world free of tax the cost of capital is independent of the firm's capital structure. In this paper we present the capital structure theorem within the framework of the theory of investors' behavior towards return and risk. Such an approach constitutes a first step towards integrating the theory of the firm's finance with the theory of investors' behavior. It may also help to clarify the controversy over the capital structure theorem. In Part I we make the assumption of a constant interest rate. This assumption facilitates the presentation of the technical aspects of the model, and constitutes an appropriate starting point for the main body of the analysis. In Part II we develop the application under the condition of variable interest rates, define the term efficient capital structure, formulate the cost-of-capital theorem and discuss its implications for the cost-of-capital curve in a world free of tax and under income tax. In Part III we summarize our conclusions.

Risk and the Addition of Debt to the Capital Structure

Abstract: This paper investigates how the addition of debt to the capital structure of a corporation affects the risk of the stockholders. In the first instance, we will hold the size of the firm constant and substitute debt for common stock. In the second situation, we will allow firm size to change, and will accomplish the increase in size by issuing debt. For both situations, we will first observe the effect of debt on the earnings per dollar of common stock investment. The analysis could also be made using the number of shares of common stock. Since the number of shares of common stock may be changed quite arbitrarily (as, for example, by stock dividends), we want to make the measure invariant to the number of shares outstanding. We will do this by using value of common stock and value of debt. We are then computing the variance of return on common stock investment when we compute variance of earnings per dollar of common stock investment. After considering how debt affects earnings per dollar of stockholders' investment, we will investigate the effect of debt on the total earnings of the stockholders, and on the probability of a deficit.