Session 21: Debt Design
2,804
Published 2024-04-17
- whether you would use short term or long term debt
- what currency your debt should be in
- whether the debt should be fixed or floating rate debt
- whether you should use straight or convertible debt
- what special features you would add to your debt to insulate the company from default
Your objective is to get the tax advantages without exposing yourself to default risk. If you want to carry this forward and do a quantitative analysis of your debt, you can try regressing enterprise value and operating income at your firm against macroeconomic variable. The spreadsheet below helps you do that:
www.stern.nyu.edu/~adamodar/pc/macrodur.xlsx
It has annual and quarterly data through 2023. Just a warning that it is extremely noisy and may spit out output that does not make sense. It also contains the sector averages, broken down by SIC code. The post class test & solution for today is attached.
Slides: pages.stern.nyu.edu/~adamodar/podcasts/cfspr24/ses…
Post class test: pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/sess…
Post class test solution: pages.stern.nyu.edu/~adamodar/pdfiles/cfovhds/sess…