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Applied Corporate Finance
About this book
Aswath Damodaran, distinguished author, Professor of Finance, and David Margolis, Teaching Fellow at the NYU Stern School of Business, have delivered the newest edition of Applied Corporate Finance. This readable text provides the practical advice students and practitioners need rather than a sole concentration on debate theory, assumptions, or models. Like no other text of its kind, Applied Corporate Finance, 4th Edition applies corporate finance to real companies. It now contains six real-world core companies to study and follow. Business decisions are classified for students into three groups: investment, financing, and dividend decisions.
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Information
The
Risk
in
Borrowing:
Default
Risk
and
the
Cost
of
Debt
81
Table
3.7
D
EFAULT
S
PREADS
FOR
R
ATINGS
C
LASSES
:
S
EPTEMBER
2013
Rating
in
S&P/Moody’s
Default
spread
(%)
Interest
rate
on
debt
(%)
Aaa/AAA
0.40
2.90
Aa2/AA
0.70
3.20
A1/A
+
0.85
3.35
A2/A
1.00
3.50
A3/A–
1.30
3.80
Baa2/BBB
2.00
4.50
Ba1/BB
+
3.00
5.50
Ba2/BB
4.00
6.50
B1/B
+
5.50
8.00
B2/B
6.50
9.00
B3/B–
7.25
9.75
Caa/CCC
8.75
11.25
Ca2/CC
9.50
12.00
C2/C
10.50
13.00
D2/D
12.00
14.50
Source:
bondsonline.com.
Figure
3.8
Default
Spreads
on
Ratings
Classes
and
Equity
Risk
Premium
(ERP)
Spread
over
treasury
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Aaa\AAA
Aa1\AA+
Aa2\AA
Aa3\AA–
A1\A+
A2\A
A3\A–
Baa1/BBB+
Baa2/BBB
Baa3/BBB–
Ba1/BB+
Ba2/BB
Ba3/BB–
B1/B+
B2/B
B3/B–
Caa/CCC+
ERP
1-Jan-08
12-Sep-08
12-Nov-08
1-Jan-09
A
final
point
worth
making
here
is
that
everything
that
has
been
said
about
the
relationship
between
interest
rates
and
bond
ratings
could
be
said
more
generally
about
interest
rates
and
default
risk.
The
existence
of
ratings
is
a
convenience
that
makes
the
assessment
of
default
risk
a
little
easier
Table of contents
- Cover
- Title Page
- Copyright
- About the Author
- Preface
- Acknowledgments
- Contents
- Chapter 1 The Foundations
- Chapter 2 The Objective in Decision Making
- Chapter 3 The Basics of Risk
- Chapter 4 Risk Measurement and Hurdle Rates in Practice
- Chapter 5 Measuring Return on Investments
- Chapter 6 Project Interactions, Side Costs, and Side Benefits
- Chapter 7 Capital Structure: Overview of the Financing Decision
- Chapter 8 Capital Structure: The Optimal Financial Mix
- Chapter 9 Capital Structure: The Financing Details
- Chapter 10 Dividend Policy
- Chapter 11 Analyzing Cash Returned to Stockholders
- Chapter 12 Valuation: Principles and Practice
- Appendix 1 Basic Statistics
- Appendix 2 Financial Statements
- Appendix 3 Time Value of Money
- Appendix 4 Option Pricing
- Index
- EULA