An Introduction to Debt Policy and Value

4.
0% Debt
25% Debt 50% Debt
100% Equity 75% Equity 50% Equity

Total Market Value of Equity

Cash Paid Out
No. Original Shares
Total Value per Share

10000
0
1000
10

8350
2500
1000
10,85

6700
5000
1000
11,7

7.
Koppers Company, Inc.
Before
Recapitalization

After
Recapitalization

212.453
601.446
813.899

212.453
601.446
813.899

172.409
195.616
15.000
430.874
813.899

1.738.095
195.616
15.000
-1.134.812
813.899

212.453
1.618.081
58.619
1.889.153

212.453
1.618.081
590.952
2.421.486

Long-term debt ....................

Deferred taxes, etc. .............
Preferred stock ...................
Common equity ..................
Total capital ....................

172.409
0
15.000
1.701.744
1.889.153

1.738.095
0
15.000
668.391
2.421.486

Number of shares ...............

Price per share ...................

28.128
$60,50

28.128
$23,76

0
1.701.744
1.701.744
$60,50

1.565.686
668.391
2.234.077
$79,43

Book-Value Balance Sheets:

Net working capital ..............
Fixed assets .......................
Total assets .....................

Long-term debt ....................

Deferred taxes, etc. .............
Preferred stock ...................
Common equity ..................
Total capital ....................

Market-Value Balance Sheets:

Net working capital ..............
Fixed assets .......................
PV debt tax shield
Total assets .....................

Value to Public Shareholders:

Cash received .....................
Value of shares ..................
Total .................................
Total per share ...................