tailieunhanh - Ebook Corporate finance (10th edition): Part 2
(BQ) Part 2 book "Corporate finance" has contents: Valuation and capital budgeting for the levered firm, dividends and other payouts, options and corporate finance, international corporate finance, financial distress, credit and inventory management, cash management,.and other contents. | Find more at CHAPTER 15 Long-Term Financing AN INTRODUCTION In July 2011, a budget battle took place in Washington that left few, if any, winners. In the end, a compromise was reached that was designed to reduce the federal budget deficit by $ trillion over 10 years. However, bond rating agency Standard & Poor’s felt that the cuts weren’t deep For updates on the latest happenings in finance, visit www. rwjcorporatefinance. enough, saying there should have been $4 trillion in savings. As a result, S&P downgraded the . government’s debt from AAA to AA1. Besides the loss of prestige resulting from the downgrade, it was estimated that the lower credit rating could result in an increase of $100 billion in borrowing costs for the . government. Also during 2011, Italy, Spain, Ireland, Portugal, Cyprus, and Greece all saw their sovereign debts downgraded. Greece’s credit rating was cut to CCC, just a step or two above default. In large part due to the low credit rating, investors demanded a yield of 14 percent on Greek bonds at a time when the yield on a 10-year Treasury note was less than 3 percent. Some Features of Common and Preferred Stocks In this chapter, we examine specific features of both stocks and bonds. We begin with stock, both common and preferred. In discussing common stock features, we focus on shareholder rights and dividend payments. For preferred stock, we explain what the “preferred” means, and we also debate whether preferred stock is really debt or equity. COMMON STOCK FEATURES The term common stock means different things to different people, but it is usually applied to stock that has no special preference either in receiving dividends or in bankruptcy. Shareholder Rights A corporation’s shareholders elect directors who, in turn, hire management to carry out their directives. Shareholders, therefore, control the corporation through the right to elect the directors. Generally, only .
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