COFI notes
COFI notes
coverage EBITInterest
interest ProfitabilityratiosSales growthGross margin SalesCOGS Sales Net
Profit Profitmargin EBITtax SalesROAEBITAS
DE NINNROEisnotaverygood For creationNWisbookvalueand
metric value
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on
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and without
issuing new equity 8 1 b ROE b
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is
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no in leverage
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sset
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shareholders
2suppose and issue a outof 150 New seniorcreditors always ios
pay super agreesincethey get
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theIsanit 1 X 1203 50 1 100 neversince allequityNPV negativeprojectsare notFinanced Shareholder
100 i 1205080 70
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happens
if 60s zo debtholders gotmorethis was
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300pro8 or00 pa2 value
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300 0.8 1000.2 260 Debt with FV 200made
of200equal In of
bondholders case default
of is
value destroyed
E D
0.8 300200 80 0.8200160 CED0.2100 20
Shareholders
tobuy
want back b onds
at80 ofparraisingequitythe
back cancelledifless than100ofthem sell otherwise
is than100anddefaultisavoided
there less However
sincebondholdersaresmalltheir Nashequilibriumis tohot
is
yunless shareholdersoffer1ormoreinwhichcase they
you all
losemoney If onlyhave i creditor classicrestructuringofferswork Asymmetricinformati
sets worth150or50with equal probabilityinvestmentof12yields20safeWithsymmetricinfoiftheFiomconFinanceinternallyshareholderswill get8ofNPV i
they to
need raise equitytheyraise12 io ofnew structure old shareholders
get1200.91081008 withs ymmetrici nfo managers are
between
indifferent
sou
financing
insideshareholdersinstead
know thefirmisworth150For sure nothing
changeswith i nternalfinancingbutforequityvaiseyouraise same existing
the but shareholders
gain
0 15020 1503 5 For pricingloss under becauseshareswere worth 17notis whilenew shareholders and ioAsymmetric
is
pay gain
i nformation
I IF shareholders
inside insteas
onthe Firmvalue
is sowithp1 raising equity of12allows existing toget5020 0.963 so 13 fair externalshareholderspay120Forafin
shareholders because
stockpriceis0.2520.75
new reactionMM
1 no Issuedebtas
and
buyasshaesati FV 0.5500.575FV.noP0.550251indifferentsonoreactionMM 10.4
50 at
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0.6 Pretore t 1001000.6Patter 1 1 1200.5200.550 0.84 shareholdersprefertokeepbuyback does not throughstockpricedoesn't
go read
debtnobuyback50 sharesato Pretore
8 0.6Parte it 110.0510.05 500.72 shareholders
want tosellilp0.5then P reation
0.80.76 stockprice
0.5.0.720.5
in state FV goesthroughprice to
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ncreasesbythetaxshield
6o 7s destroyedbad
120 Parte300.520 0.75 buyback drops 0.75 value d estroy
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ifROLE posttaxcostofcapital EVAEBIT it WACCNANACROCE attentaWACOROLE taxENEL profits
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