ADM 3350 Lecture Notes - Lecture 5: Forego, Cash Flow, Net Present Value
21 Nov 2017
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October 21st 2016: examine the impact of financial distress and bankruptcy costs on the financial leverage decision, understand the role of agency costs of debt on optimal financial leverage, establish how firms determine financial leverage in practice. Video what were the signs of distress: excess leverage. Reason: banks were unable to adequately deal with their credit/loan risk. Cds: derivatives to take their loan risks, created to make the financial system safer. Ha(cid:448)e (cid:272)ash set aside (cid:449)hen you get a (cid:271)ig loan . Create a portfolio of credit default swaps. Jp morgan used credit derivative to off load their risk: to give investors opportunity to invest in their portfolio. Chapter 17 -capital structure: limits to the use of debt. 17. 4 integration of tax effects and financial distress costs. 17. 6 shirking, perquisites, and bad investments: a note on agency cost of equity.
