Showing papers on "Embedded value published in 1983"
TL;DR: In this article, it was shown that if management issues additional bonds with claims equivalent to those of outstanding bonds and uses the proceeds to retire stock, the number of future states in which the old bondholders' claims can be entirely satisfied is reduced.
Abstract: * Fama and Miller [4], Stiglitz [14], and Black and Scholes [2] have pointed out that wealth transfers between a firm's stockholders and its bondholders are conceptually possible. For instance, if management issues additional bonds with claims equivalent to those of outstanding bonds and uses the proceeds to retire stock, the number of future states in which the old bondholders' claims can be entirely satisfied is reduced. Hence the value of the old bonds is reduced. Schall [13] has shown that in a perfect capital market such a maneuver will not affect total firm value (since investment policy is unchanged), and as a result the reduction in old bondholder wealth must accrue to the
9 citations
8 citations
TL;DR: The Straight-Line Income Capitalization Model: A Special Case of Present Value as discussed by the authors is a special case of the present value model, which is used in the Straight-line income capitalization model.
Abstract: (1983). The Straight-Line Income Capitalization Model: A Special Case of Present Value. The Engineering Economist: Vol. 28, No. 4, pp. 311-321.
5 citations