DOCSLIB.ORG

Outside Financing Capacity

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Outside Financing Capacity Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (1) An entrepreneur (borrower). An investment project requiring fixed investment I. The entrepreneur has cash on hand (or liquid securities) A < I. To implement the project the entrepreneur needs (borrows) I − A. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (2) If undertaken the project either succeeds: verifiable income R > 0. Or the project fails: yields zero income. Let p denote the probability of success. The project is subject to moral hazard. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions(3) The entrepreneur can exert high effort (work, take no private benefit), or zero effort (shirk, take a private benefit). Equivalently, the entrepreneur chooses between project with high or low probability of success. High effort yields p = pH ; low effort yields p = pL, with pL < pH . Denote ∆p = pH − pL. Low effort yields a private benefit B > 0 to the entrepreneur. (B can be interpreted as a disutility of effort). Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (4) Borrower and lenders (investors) are risk-neutral. For simplicity, there is no time preference: investors require an interest rate equal to 0 (at least). The entrepreneur is protected by limited liability (income cannot be negative). Competition among lenders drive interest and profit to zero. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions(5) The loan contract specifies how the profit is shared between borrower and lenders. Limited liability implies that both sides receive zero in case of failure. Profit sharing: R = Rb + Rl , where Rb is the the borrower’s share, Rl is the lender’s share. Lender’s net payoff is Rl − (I − A) in case of success; −(I − A) in case of failure. The borrower’s payoff is thus Rb − A in case of success and −A in case of failure. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (6) The zero-profit constraint for lenders is pH Rl = I − A. Assuming high effort, the rate of interest is ι, where 1 Rl = (1 + ι)(I − A) or 1 + ι = : pH The nominal rate of interest ι reflects a default premium. We assume that the project is viable only if effort is high: that is, pH R − I > 0 and pLR − I + B < 0: No loan giving an incentive to low effort will be granted: either the lender or the borrower would lose money in expectation. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts The lender’s credit analysis (1) The borrower’s tradeoff: obtain private benefit B but reduce probability of success to pL. We have the following incentive compatibility constraint, IC: pH Rb ≥ pLRb + B or B R ≥ : b ∆p The highest income that can be pledged to lenders is R − B=∆p. In expected terms: pH (R − B=∆p). Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts The lender’s credit analysis (2) The lender’s individual rationality constraint, IR, is therefore B p R − ≥ I − A: H ∆p Financing can be arranged only if B A ≥ I − p R − : H ∆p We assume that I > pH (R − B=∆p). Otherwise, a lender with A = 0 could obtain credit. The project’s NPV is smaller than the minimum expected rent that must be left to the borrower to satisfy IC. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts The lender’s credit analysis (3) The borrower must have enough assets A ≥ A = I − pH (R − B=∆p) in order to be granted credit. If A < A, the project has positive NPV and yet is not funded. The parties cannot find an agreement that both induces high effort and yield enough benefit to lenders. This is credit rationing. The borrower is ready to give more of the return to the lender but the lender does not want to grant such a loan. If A ≥ A, the entrepreneur can secure financing (we have a necessary and sufficient condition for financing). Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts The lender’s credit analysis (4) The entrepreneur offers the minimal claim Rl , such that pH Rl = I − A. The entrepreneur’s stake satisfies I − A I − A B Rb = R − Rl = R − ≥ R − = ; pH pH ∆p so that the entrepreneur chooses high effort. One only lends to the rich. If A ≥ A, the borrower’s utility is Ub = pH Rb − A = pH (R − Rl ) − A = pH R − I: the borrower receives the entire social surplus of the investment. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Determinants of credit rationing What are the determinants of credit rationing? A low amount of cash A. A high agency cost (or agency rent) B=∆p. Moral hazard is determined by the private benefit B and the likelihood ratio ∆p=pH . The likelihood ratio measures how much the observable result (success or failure) reveals the underlying choice of effort. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Do investors hold debt or equity? Remark that the loan contract can be interpreted as debt here. This is because we have a two-outcome model. Interpretation as debt: the borrower must reimburse Rl or else go bankrupt. In the case of reimbursement, the borrower keeps the residual R − Rl . Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Costly State Verification Model This model has been analyzed by Townsend (1979) and Gale and Hellwig (1985). We derive the financial structure of the firm from an optimization problem (and from primitive assumptions). Moral hazard here comes from the fact that the entrepreneur can divert (steal) income. There is no effort variable here. Income is semi-verifiable: the lenders can perfectly observe income, provided that they incur an audit cost K . This cost is borne by lenders. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Costly State Verification Model (2) The entrepreneur invests his(her)money A. Investment cost is I. Investment yields a random income R distributed on [0; +1), with density p(R). The entrepreneur observes R without cost. Timing: 1. Loan agreement, I is sunk. 2. Income R is realized. 3. Entrepreneur reports R^ . 4. Lender may decide to audit. 5. Reimbursement. We apply the Revelation Principle: there is no loss of generality if we focus on revealing mechanisms, i.e., contracts such that the entrepreneur has an incentive to report the true income R^ = R. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts CSV Model (3): Definition of a Contract A contract is a mapping giving a probability of no audit y(R^ ) 2 [0; 1] for each report R^ , ... ^ ^ and nonnegative rewards: w0(R; R) and w1(R; R) in the absence or presence of an audit. The lender’s return Rl depends on R^ only in the absence of audit: ^ ^ w0(R; R) = R − Rl (R). Define the entrepreneur’s expected reward under truthful reporting w(R) = y(R)w0(R; R) + (1 − y(R))w1(R; R). Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts CSV Model (4): Standard Debt Contract A standard debt contract specifies a debt level D. There is no audit if debt D is repaid; an audit and no reward if D is not repaid. Formally, y(R) = 1 if R ≥ D and y(R) = 0 if R < D. w(R) = maxfR − D; 0g. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts CSV Model (5): Optimal Contract We maximize the expected income Z +1 Maximize w(R)p(R)dR; 0 with respect to fy(:); w0(:; :); w1(:; :)g, subject to the entrepreneur’s incentive constraint IC , i.e., ^ ^ ^ ^ w(R) = maxfy(R)w0(R; R) + (1 − y(R))w1(R; R)g R^ and the lender’s participation constraint, IR, that is, Z +1 [R − w(R) − (1 − y(R))K ]p(R)dR ≥ I − A: 0 and limited liability constraints w0(R; R) ≥ 0, w1(R; R) ≥ 0. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts CSV Model (5b): Optimal Contract Since IR will be binding at the optimum, we can susbsitute IR in the objective function (the borrower’s expected profit) and we find, Z +1 Z +1 w(R)p(R)dR = −K (1−y(R))p(R)dR−(I−A)+E(R): 0 0 The objective is equivalent to minimizing the expected audit cost. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Analysis of the Optimal Contract (1) Assume that audits are deterministic: y(R) = 0 or 1 for all R. Feasible values of R are divided into to regions: the no-audit region Q0 and audit region Q1 (A partition of [0; +1)).
Load more

Recommended publications
  • The CEO's Guide to Corporate Finance
    CORPORATE FINANCE PRACTICE The CEO’s guide to corporate finance Richard Dobbs, Bill Huyett, and Tim Koller Artwork by Daniel Bejar Four principles can help you make great financial decisions— even when the CFO’s not in the room. The problem Strategic decisions can be com- plicated by competing, often spurious notions of what creates value. Even executives with solid instincts can be seduced by the allure of financial engineering, high leverage, or the idea that well-established rules of eco- nomics no longer apply. Why it matters Such misconceptions can undermine strategic decision making and slow down economies. What you should do about it Test decisions such as whether to undertake acquisitions, make dives- titures, invest in projects, or increase executive compensation against four enduring principles of corporate finance. Doing so will often require managers to adopt new practices, such as justifying mergers on the basis of their impact on cash flows rather than on earnings per share, holding regular business exit reviews, focusing on enterprise-wide risks that may lurk within individual projects, and indexing executive compensation to the growth and market performance of peer companies. 3 The CEO’s guide to corporate finance It’s one thing for a CFO to understand the technical methods of valuation—and for members of the finance organization to apply them to help line managers monitor and improve company performance. But it’s still more powerful when CEOs, board members, and other non- financial executives internalize the principles of value creation. Doing so allows them to make independent, courageous, and even un- popular business decisions in the face of myths and misconceptions about what creates value.
    [Show full text]
  • Corporate Finance Lecture Note Packet 2 Capital Structure, Dividend Policy and Valuation
    Aswath Damodaran 1 CORPORATE FINANCE LECTURE NOTE PACKET 2 CAPITAL STRUCTURE, DIVIDEND POLICY AND VALUATION Aswath Damodaran Spring 2016 Aswath Damodaran 2 CAPITAL STRUCTURE: THE CHOICES AND THE TRADE OFF “Neither a borrower nor a lender be” Someone who obviously hated this part of corporate finance First principles 3 Aswath Damodaran 3 The Choices in Financing 4 ¨ There are only two ways in which a business can raise money. ¤ The first is debt. The essence of debt is that you promise to make fixed payments in the future (interest payments and repaying principal). If you fail to make those payments, you lose control of your business. ¤ The other is equity. With equity, you do get whatever cash flows are left over after you have made debt payments. Aswath Damodaran 4 Global Patterns in Financing… 5 Aswath Damodaran 5 And a much greater dependence on bank loans outside the US… 6 Aswath Damodaran 6 Assessing the existing financing choices: Disney, Vale, Tata Motors, Baidu & Bookscape 7 Aswath Damodaran 7 8 The Transitional Phases.. 9 ¨ The transitions that we see at firms – from fully owned private businesses to venture capital, from private to public and subsequent seasoned offerings are all motivated primarily by the need for capital. ¨ In each transition, though, there are costs incurred by the existing owners: ¤ When venture capitalists enter the firm, they will demand their fair share and more of the ownership of the firm to provide equity. ¤ When a firm decides to go public, it has to trade off the greater access to capital markets against the increased disclosure requirements (that emanate from being publicly lists), loss of control and the transactions costs of going public.
    [Show full text]
  • Who Regulates Whom? an Overview of the US Financial Regulatory
    Who Regulates Whom? An Overview of the U.S. Financial Regulatory Framework Updated March 10, 2020 Congressional Research Service https://crsreports.congress.gov R44918 Who Regulates Whom? An Overview of the U.S. Financial Regulatory Framework Summary The financial regulatory system has been described as fragmented, with multiple overlapping regulators and a dual state-federal regulatory system. The system evolved piecemeal, punctuated by major changes in response to various historical financial crises. The most recent financial crisis also resulted in changes to the regulatory system through the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (Dodd-Frank Act; P.L. 111-203) and the Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289). To address the fragmented nature of the system, the Dodd-Frank Act created the Financial Stability Oversight Council (FSOC), a council of regulators and experts chaired by the Treasury Secretary. At the federal level, regulators can be clustered in the following areas: Depository regulators—Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve for banks; and National Credit Union Administration (NCUA) for credit unions; Securities markets regulators—Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC); Government-sponsored enterprise (GSE) regulators—Federal Housing Finance Agency (FHFA), created by HERA, and Farm Credit Administration (FCA); and Consumer protection regulator—Consumer Financial Protection Bureau (CFPB), created by the Dodd-Frank Act. Other entities that play a role in financial regulation are interagency bodies, state regulators, and international regulatory fora. Notably, federal regulators generally play a secondary role in insurance markets.
    [Show full text]
  • What Is Corporate Finance? Includes Any Decisions Made by a Business
    1 Lecture I What is Corporate Finance? Includes any decisions made by a business that affect its finances Three major decisions: • Investments: Where should a firm invest its (scarce) resources? - project analysis - security analysis • Financing: How should the firm raise (additional) resources? - equity/debt/hybrids - long/short term • Dividend decision: What should the firm do with excess resources? - reinvest in business - distribute as dividends/return on capital BAFI 402: Financial Management I, Fall 2001 A. Gupta 2 Lecture I Corporate Finance – a balance sheet perspective Balance Sheet Current Assets Current Liabilities Cash Accounts Payable Accounts Receivable Notes Payable Inventory Long-term Debt Fixed Assets Shareholder’s Equity Tangible Common Stock Intangible Retained Earnings Total Assets Total Liabilities & Equity _________________ ____________________ Investment decisions Financing decisions Two separate decisions BAFI 402: Financial Management I, Fall 2001 A. Gupta 3 Lecture I The objective of the firm Why do we need an objective function? - How do you pick amongst alternatives? (e.g. NPV rule for projects) - Single/multiple objectives – if multiple, how do you weight objectives, or prioritize? (e.g. man serving many masters!) What’s a good objective function? - clear and unambiguous (should not vary from case to case and person to person) - measurable, in a clear and timely manner (“social welfare” – how do you measure it?) - no side costs - should benefit firm’s long-term health and value What are some common candidates for the objective function of a corporate firm (and hence the financial manager?)? BAFI 402: Financial Management I, Fall 2001 A. Gupta 4 Lecture I The Corporate Objective • In traditional corporate finance , the objective of the firm is to maximize the value of the firm.
    [Show full text]
  • Corporate Finance and Monetary Policy!
    Corporate Finance and Monetary Policy Guillaume Rocheteau University of California, Irvine Randall Wright University of Wisconsin, Madison; FRB Chicago and FRB Minneapolis Cathy Zhang Purdue University This version: January 2016 Abstract This paper provides a theory of external and internal …nance where entrepreneurs …nance random investment opportunities with …at money, bank liabilities, or trade credit. Loans are distributed in an over-the-counter credit market where the terms of the loan contract, including size, rate, and down payment, are negotiated in a de- centralized fashion subject to pledgeability constraints. The model has implications for the cross-sectional distribution of corporate loan rates and loan sizes, interest rate pass-through, and the transmission of monetary policy (described either as money growth or open market operations) with or without liquidity requirements. JEL Classi…cation Numbers: D83, E32, E51 Keywords: Money, Credit, Interest rates, Corporate Finance, Pledgeability. We thank Sebastien Lotz for his input and comments on a preliminary version of the paper, and many people for input on this and related work. We also thank conference participants at the 2015 WAMS-LAEF Workshop in Sydney for useful feedback and comments. Wright acknowledges support from the Ray Zemon Chair in Liquid Assets at the Wisconsin School of Business. The usual disclaimers apply. 1 Introduction It is commonly thought (and taught) that monetary policy in‡uences the real economy by setting short-term nominal interest rates that a¤ect the real rate at which households and …rms borrow. While perhaps appealing heuristically, it is not easy to model this rigor- ously. One reason is that it arguably requires, among other things, an environment where money, credit, and government bonds coexist.
    [Show full text]
  • How Do Cfos Make Capital Budgeting and Capital Structure
    HOW DO CFOS MAKE by John Graham and Campbell Harvey, CAPITAL BUDGETING Duke University* AND CAPITAL STRUCTURE DECISIONS? e recently conducted a comprehensive survey that analyzed the current practice of corporate finance, with particular focus on the W areas of capital budgeting and capital structure. The survey results enabled us to identify aspects of corporate practice that are consistent with finance theory, as well as aspects that are hard to reconcile with what we teach in our business schools today. In presenting these results, we hope that some practitioners will find it worthwhile to observe how other companies operate and perhaps modify their own practices. It may also be useful for finance academics to consider differences between theory and practice as a reason to revisit the theory. We solicited responses from approximately 4,440 companies and received 392 completed surveys, representing a wide variety of firms and industries.1 The survey contained nearly 100 questions and explored both capital budgeting and capital structure decisions in depth. The responses to these questions enabled us to explore whether and how these corporate policies are interrelated. For example, we investigated whether companies that made more aggressive use of debt financing also tended to use more sophisticated capital budgeting techniques, perhaps because of their greater need for discipline and precision in the corporate investment process. More generally, the design of our survey allowed for a richer under- standing of corporate decision-making by analyzing the CFOs’ responses in the context of various company characteristics, such as size, P/E ratio, leverage, credit rating, dividend policy, and industry.
    [Show full text]
  • Global Financial Services Regulatory Guide
    Global Financial Services Regulatory Guide Baker McKenzie’s Global Financial Services Regulatory Guide Baker McKenzie’s Global Financial Services Regulatory Guide Table of Contents Introduction .......................................................................................... 1 Argentina .............................................................................................. 3 Australia ............................................................................................. 10 Austria ................................................................................................ 22 Azerbaijan .......................................................................................... 34 Belgium .............................................................................................. 40 Brazil .................................................................................................. 52 Canada ................................................................................................ 64 Chile ................................................................................................... 74 People’s Republic of China ................................................................ 78 Colombia ............................................................................................ 85 Czech Republic ................................................................................... 96 France ............................................................................................... 108 Germany
    [Show full text]
  • Fundamental Tax Reform and Corporate Financial Policy William
    Fundamental Tax Reform and Corporate Financial Policy William Gentry and R. Glenn Hubbard EXECUTIVE SUMMARY The effects of tax reform on corporate financial decisions help determine whether reform will increase capital formation and simplify the tax system. This paper describes the effects of fundamental tax reform on corporate tax planning and summarizes economists' knowledge of the magnitude of these effects. We analyze both income tax reform, consisting of integrating the corporate and personal income taxes, and moving to a broad- based consumption tax. As prototypes of reform, we use the U.S. Treasury's comprehensive business income tax proposal for income tax reform and the flat tax for consumption tax reform. The critical difference between these reforms is that the consumption tax gives firms immediate deductions for capital outlays instead of the depreciation allowances of the income tax. Tax reform can affect business organizational form, capital structure, and timing decisions. Our major theme is that the two types of reform will have similar effects on business financial decisions because they both integrate corporate and personal income taxes. Both reforms eliminate the tax differentials between corporate and noncorporate businesses and between debt and equity financing. Since both reforms eliminate investor- level taxes on financial assets, they reduce the effects of taxes on timing decisions associated with financial assets, such as the timing of corporate dividends. Assumptions about how taxes affect these various financial decisions have important implications for the incidence of the corporate tax. These reforms also greatly alter the current incentives for tax-motivated financial planning. 1. INTRODUCTION Proponents of fundamental tax reform in the United States claim that tax reform would increase saving and investment (see, e.g., the analysis in Auerbach, 1996) and create a simpler tax system (see, e.g., the analysis in Slemrod and Bakija, 1996).
    [Show full text]
  • FINS5511 CORPORATE FINANCE Course Outline SEMESTER 1, 2016
    Business School School of Banking & Finance FINS5511 CORPORATE FINANCE Course Outline SEMESTER 1, 2016 Part A: Course-Specific Information Part B: Key Policies, Student Responsibilities and Support business.unsw.edu.au CRICOS Code 00098G TABLE OF CONTENTS PART A: COURSE-SPECIFIC INFORMATION 3 1. STAFF CONTACT DETAILS 3 1.1 Communication with Staff 3 2. COURSE DETAILS 3 2.1. Teaching Times and Locations 3 2.2. Units of Credit 3 2.3. Summary of Course 3 2.4. Course Aims and Relationship to Other Courses 3 2.5. Student Learning Outcomes 4 3. LEARNING AND TEACHING ACTIVITIES 6 3.1. Approach to Learning and Teaching in the Course 6 3.2. Learning Activities and Teaching Strategies 6 4. ASSESSMENT 6 4.1. Formal Requirements 6 4.2. Assessment Details 6 4.3. Assessment Format 7 4.3.1 IN-CLASS QUIZZES (40%) ............................................................................. 7 4.3.2 FORMAL EXAMINATION COMPONENT (60%).................................................... 7 5. COURSE RESOURCES 7 6. COURSE EVALUATION AND DEVELOPMENT 9 7. COURSE SCHEDULE 9 PART B: KEY POLICIES, STUDENT RESPONSIBILITIES AND SUPPORT 9 8. PROGRAM LEARNING GOALS AND OUTCOMES 9 9. ACADEMIC HONESTY AND PLAGIARISM 10 10. STUDENT RESPONSIBILITIES AND CONDUCT 11 10.1. Workload 11 10.2. Attendance 11 10.3. General Conduct and Behaviour 11 10.4. Occupational Health and Safety 11 10.5. Keeping Informed 12 11. SPECIAL CONSIDERATION 12 12. STUDENT RESOURCES AND SUPPORT 13 business.unsw.edu.au CRICOS Code 00098G PART A: COURSE-SPECIFIC INFORMATION 1. STAFF CONTACT DETAILS Name Office Phone E-mail Address Consultation Number Hours Dr. Zhian Chen BUS Room Consult Web Site 9385 5878 [email protected] (Lecturer-in-charge) 359c for Details The School’s fax number for emergency situations is 9385 6347.
    [Show full text]
  • Corporate Finance
    STUDY SESSION 7 Corporate Finance This study session covers the capital budgeting process with emphasis on its prin- ciples and investment decision criteria. Project evaluation through the use of spread- sheet modeling is presented. Other income and valuation model approaches are compared. The subject of capital structure is introduced with the classic Modigliani– Miller irrelevance theory, which proposes that capital structure decisions should have no effect on company value. Additional considerations of taxes, agency costs, and financial distress are introduced. The session concludes with discussion on dividend policies, factors affecting distribution or reinvestment, and dividend payout or share repurchase decisions. READING ASSIGNMENTS Reading 21 Capital Budgeting by John D. Stowe, PhD, CFA, and Jacques R. Gagné, FSA, CFA, CIPM Reading 22 Capital Structure by Raj Aggarwal, PhD, CFA, Pamela Peterson Drake, PhD, CFA, Adam Kobor, PhD, CFA, and Gregory Noronha, PhD, CFA Reading 23 Dividends and Share Repurchases: Analysis by Gregory Noronha, PhD, CFA, and George H. Troughton, PhD, CFA 2018 Level II CFA Program Curriculum. © 2017 CFA Institute. All rights reserved. Study Session 7 2 LEARNING OUTCOMES READING 21. CAPITAL BUDGETING The candidate should be able to: a calculate the yearly cash flows of expansion and replacement capital projects and evaluate how the choice of depreciation method affects those cash flows; b explain how inflation affects capital budgeting analysis; c evaluate capital projects and determine the optimal capital
    [Show full text]
  • Guide to Going Public Strategic Considerations Before, During and Post-IPO Contents
    Guide to going public Strategic considerations before, during and post-IPO Contents 1 | Guide to going public Foreword For private companies seeking to raise capital and capital-held companies considering their strategic options for funding for provide exits for their shareholders, an initial public growth, including a public listing. We have professionals with extensive, offering (IPO) can be a superior route and strategic proven experience with domestic and international capital markets. Our professionals have deep knowledge of your industry, which allows us to option to funding growth and to access deep pools of create interdisciplinary teams that will steer you onward, through and liquidity. While challenging markets will come and go, beyond your IPO and support your plans for growth. it’s the companies that are fully prepared that will We are confident this Guide to going public will give you an initial overview best be able to create value and fully leverage the and checklists of the key phases in going public from a global perspective. IPO windows of opportunity whenever they are open. It is based on EY insights from many IPO transactions, to help you begin Companies that have completed a your IPO value journey, so that you are well prepared to transform your successful IPO know the process private company into a successful public company that continually delivers The companies that involves the complete transformation value to its shareholders. With more than 30 years’ experience helping of the people, processes and culture companies prepare, grow and adapt to life as a public entity, we are well- are fully prepared will be of the organization from a private suited to take you on your IPO journey providing tailored support and enterprise to a public one.
    [Show full text]
  • Financing Growth: the Impact of Financial Regulation
    1 Table Contents Executive Summary ................................................................................................................................................................. 3 State of Corporate Finance ................................................................................................................................................. 3 The Future: What Are Companies Facing ........................................................................................................................... 4 Introduction ............................................................................................................................................................................ 6 Methodology ........................................................................................................................................................................... 7 State of Corporate Finance ..................................................................................................................................................... 8 The Future: What Are Companies Facing ............................................................................................................................. 11 Cash Crunch ...................................................................................................................................................................... 11 Impact of Financial Regulations on Main Street Companies ...........................................................................................
    [Show full text]