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xCFA 2 2017 > Corporate Finance > Flashcards

Flashcards in Corporate Finance Deck (6)
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♦CORP♦ Modigliani-Miller

MM I (w/o taxes): VL = VU

MM II (w/o taxes): Ke = Ko + D/E (Ko - Kd)

MM I (w/ taxes): VL = VU + (T * D)

MM II (w/ taxes): Ke = Ko + D/E (Ko - Kd) * (1 - T)

VL = VU + Tax Shield - Cost of Financial Distress


♦CORP♦ Price change ex-dvd

D * (1 + Td) / (1 + Tcg)


♦CORP♦ Expected increase in dividends

Expected increase = [(exp earnings * payout) - previous dvd] * adjustment factor1/#anos até estabilizar


♦CORP♦ Ethical Decision Making

Friedman Doctrine: Only responsibility is to increase profits “within the rules of the game.” Utilitarianism: Produce the highest good for the largest number of people. Kantian ethics: People are more than just an economic input and deserve dignity and respect. Rights theories: Even if an action is legal, it may violate fundamental rights and be unethical. Justice theories: Focus on a just distribution of economic output (e.g., “veil of ignorance”).


♦CORP♦ Economic Income and Economic Profit

Economic income = cash flow + Delta Mkt Value  (before interest expense - vai na taxa de desconto)

Economic profit = NOPAT − $WACC = EBIT(1 − T) − $WACC


♦CORP♦ Carv-out, Spin-off, Split-off

Carve-out: Newco w/ new shareholders

Spin-off: New-co with existing shareholders

Split-off: Allow shareholders to exchange parent for New-co