I dont mean to be off topic but does anybody know a tool to get back into an Instagram account? I stupidly forgot my password. I would appreciate any assistance you can give me!
@Westley Leonardo I really appreciate your reply. I found the site on google and I'm trying it out atm. Looks like it's gonna take quite some time so I will get back to you later with my results.
I have an online exam since uni is shut down due to the virus. rewatching the lecture podcast didn't do much help to me so THANK YOU SIR your videos help a lot
If you borrow debt to repurchase shares and the debt has an interest, how it is gonna change the debt and equity? total debts =($120000+ interest), and Equity= Total assets - total debts. Is that correct?
Hi Raja, couple of things: 1) interest payments go on the income statement, not the balance sheet 2) interest payments affect the value of a company when there are taxes, because they are tax deductible and reduce taxes to be paid (or increase tax shield). If you see my videos on M&M (with taxes), I go into more detail on this.
Interesting topic although I’ve few doubts: 1- The repurchase of shares comes when there are shares out in the market and from the example this is not shown. 2- A part from this the demonstration looks wired: if I take on debt I will have more cash in my assets taking the 300K up to 420K. My equity will remain the same 300K (no dilution or accretion is fine) and debt will increase to 120K. The value of the company will stay the same because EV = Equity + Net debt so 300 + ( 120 - 120 ). Does it sound fair??
1. The repurchase is happening because there are 50,000 shares outstanding in the market. Shares are being repurchased from these. 2. It does rise from 300K to 420K. However, the very rule of MM1 (without taxes) is that the value of the firm remains constant when it becomes levered from being unlevered. Vu = VL. Hence, the 120K rise in firm value due to the debt is actually compensated by the fall in equity value so that the overall asset value stays constant. Hope this helps!
@@aieshijain Thank you for the reply. First of all mine it's just a shared though. 1. Good to know about the shares because this was not stated. 2. I completely agree with you as well as the MM1 theorem: I believe the first assumption of MM is met since the value of the firm does not change and this is not because the value of the equity decreases unless the company is in a distress situation. Hence 420 on the asset side and the 300 + 120 on the Equity & Liability still holds since the value of the firm will be EV = Equity + Net debt so that 300 + ( 120 - 120 ) = 300. Here it comes the second theorem of MM that states that the debt is increasing the risk of the Equity holders so what the change will be the return on equity and not the value of the Equity per se. Moreover, the increase in debt is not having a dilutive effect on Equity, in this case if the value of equity decreases and the shares + the 50 new will create a dilution effect. Do you agree on that?
I dont quite understand how you are relating Assets' book value to company's value, since company value is related to discounted cashflows and assets' value is related to accounting value at the balance sheet. That said equity book value for a 100% equity firm doesn't translate the market value of the firm. In the exemple you gave, if a company borrows 120 of debt to buyback shares, in the balance sheet you will have equity book value (that does not necessarily match up equity market value) and debt book value (that actually match up current share's market value). How are we supposed to deal with that?
Hi Ricardo, that's a good and fair question. I'm assuming that all values on the "balance sheets" in the video are Market Value. Yes, balance sheets are usually based on book value, but think of these as like "market value balance sheets". So the Assets, Debt and Equity are always based on market value. I could've mentioned that in the video to clarify. Thanks for bringing it to my attention.
I honestly want to know why those stupid so called professors don’t know how to explain things????not just that they confuse you and make it harder... i have a professor 🤓 who says you add this by this add this by that !! What the hell is this and that seriously!!!anyway you are 100000 better than my professor thank you
I didn't understand why assets are still 300k after borrowing money. Let's suppose I have 5 bucks and I borrow another 5 bucks. That means I have 10 bucks, so my assets are 10 bucks. Isn't this how money works?
Hey everyone, check out my website www.FIN401.com to see more of my videos on Capital Structure.
how can show that the share price is constant when the firm repurchanging shares( no taxes)?
I dont mean to be off topic but does anybody know a tool to get back into an Instagram account?
I stupidly forgot my password. I would appreciate any assistance you can give me!
@Amos Zahir instablaster =)
@Westley Leonardo I really appreciate your reply. I found the site on google and I'm trying it out atm.
Looks like it's gonna take quite some time so I will get back to you later with my results.
@Westley Leonardo it worked and I now got access to my account again. I'm so happy:D
Thank you so much you saved my account :D
This guy has literally saved my semester 🙏
This series about M&M is literally the main reason I passed my exam today. Thank you so much man!
I passed my finance final thanks to you! You're the man! Thank you so much Patrick
What are you studying
you sir, have an awesome way of explaining your class!!!
You're the best Patrick! Thank you so much for posting these videos, they are lifesavers!!
You are an amazing professor ... really .. simple and valued
just discovered your videos. I am learning more with you than my professor!! Thank you!
Thank you for the excellent explanation of this concept! I'm watching all your videos on finance now.
Thank you so much for these videos. All of your videos are great!
I have an online exam since uni is shut down due to the virus. rewatching the lecture podcast didn't do much help to me so THANK YOU SIR your videos help a lot
Why don’t teachers explain things like this gentleman, believe you deserve to teach in top universities not in TH-cam, thumps up and sub
omg Patrick! Thank you so much !! you've literally saved my life!
Saved me for my exam I was doomed to fail!! Haha thanks man
Clear message, clear structure, easy to understand, thank you
this videos are well done, everything is clear. great job.
crystal clear explanations. thanks, Sir!
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Thanks bro for the lecture. Much appreciated!
If I pass the midterm Finance exam, it's because of you Hahaha Thank you so much!
seriously helping me pass my MBA corporate Finance class!!! Thank you so much!
No worries :))
same :)
Great video, great explanations. Thanks
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this guy explains it better than my professor who is a CFA
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You saved my life
Great explanation, thank you!!!
This helped so much! Thank you!!!!!!!
Can u please tell me what are your video settings on ur dslr camera
Awesome video. Thank you
Thanks a lot for this helpful video!
Thank you so much for the video!
You are excellent Patrick...
Thank you :)
Well explained. Thank you!
Thx, saved my back!!
Good Afternoon sir, but does the assumption that share prices is constant only apply if the debt does not have an interest payment?
Thanks Sir🥰 from India
Well explained, thanks man
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Awesome sur tomorrow i have exam i hope i may to manage with such kind of question in exam if i'll face with them :)
So does the company own the 20,000 shares and the other 30,000 are public?
AWESOME!!
Nice! Thank you.
very well explained thanks!
You're welcome!
Simple explanation
Please how did you get the $6?
If you borrow debt to repurchase shares and the debt has an interest, how it is gonna change the debt and equity? total debts =($120000+ interest), and Equity= Total assets - total debts. Is that correct?
does homemade leverage work when there is no tax
Thanks mate
Thank you!!!!!!!!!!!!!!!!!!!!!!!!
Many thanks, Brother ...
you're welcome :)
God sent!
Thanks
Niiiiiice video
thanks :)
you are smart
Great
Sir what is assumption of this
What about the interest payments that arise with debt? Where do they go in balance sheet and don't they affect the market value of the company?
Hi Raja, couple of things: 1) interest payments go on the income statement, not the balance sheet 2) interest payments affect the value of a company when there are taxes, because they are tax deductible and reduce taxes to be paid (or increase tax shield). If you see my videos on M&M (with taxes), I go into more detail on this.
nice, nice, nice
I do not understand why we are dividing 300 000 by 50 000. These are outstanding shares, we do not know how many shares within 300 000, correct?
Interesting topic although I’ve few doubts:
1- The repurchase of shares comes when there are shares out in the market and from the example this is not shown.
2- A part from this the demonstration looks wired: if I take on debt I will have more cash in my assets taking the 300K up to 420K. My equity will remain the same 300K (no dilution or accretion is fine) and debt will increase to 120K.
The value of the company will stay the same because EV = Equity + Net debt so 300 + ( 120 - 120 ).
Does it sound fair??
1. The repurchase is happening because there are 50,000 shares outstanding in the market. Shares are being repurchased from these.
2. It does rise from 300K to 420K. However, the very rule of MM1 (without taxes) is that the value of the firm remains constant when it becomes levered from being unlevered. Vu = VL. Hence, the 120K rise in firm value due to the debt is actually compensated by the fall in equity value so that the overall asset value stays constant.
Hope this helps!
@@aieshijain Thank you for the reply. First of all mine it's just a shared though.
1. Good to know about the shares because this was not stated.
2. I completely agree with you as well as the MM1 theorem:
I believe the first assumption of MM is met since the value of the firm does not change and this is not because the value of the equity decreases unless the company is in a distress situation.
Hence 420 on the asset side and the 300 + 120 on the Equity & Liability still holds since the value of the firm will be EV = Equity + Net debt so that 300 + ( 120 - 120 ) = 300.
Here it comes the second theorem of MM that states that the debt is increasing the risk of the Equity holders so what the change will be the return on equity and not the value of the Equity per se.
Moreover, the increase in debt is not having a dilutive effect on Equity, in this case if the value of equity decreases and the shares + the 50 new will create a dilution effect.
Do you agree on that?
@@aieshijain I was confused too still am but just a lil. Thanks
🐐💪🏾
😍😍
nice presentation but please Mr. when you doing videos please put part by part or simply say part 1, part2 ........................
this guy is a god
Thanks!
U look cool for a finance guy...😀
I dont quite understand how you are relating Assets' book value to company's value, since company value is related to discounted cashflows and assets' value is related to accounting value at the balance sheet. That said equity book value for a 100% equity firm doesn't translate the market value of the firm.
In the exemple you gave, if a company borrows 120 of debt to buyback shares, in the balance sheet you will have equity book value (that does not necessarily match up equity market value) and debt book value (that actually match up current share's market value). How are we supposed to deal with that?
Hi Ricardo, that's a good and fair question. I'm assuming that all values on the "balance sheets" in the video are Market Value. Yes, balance sheets are usually based on book value, but think of these as like "market value balance sheets". So the Assets, Debt and Equity are always based on market value. I could've mentioned that in the video to clarify. Thanks for bringing it to my attention.
Thank you for replying
@@batatambor Good info ... thanks this have really help
Pls give a video on Deferred Tax
I honestly want to know why those stupid so called professors don’t know how to explain things????not just that they confuse you and make it harder... i have a professor 🤓 who says you add this by this add this by that !! What the hell is this and that seriously!!!anyway you are 100000 better than my professor thank you
How come you said market value = company asset value ??? Asset value should be equals to book value.
I can't believe I'm going to report this...
If you give me the material
Come teach at my university
Omg you’re cute 😁
I didn't understand why assets are still 300k after borrowing money. Let's suppose I have 5 bucks and I borrow another 5 bucks. That means I have 10 bucks, so my assets are 10 bucks. Isn't this how money works?
This guy seems like he is about to cover some eminem, and, come to think about it, he does.
imma fail my unit this is hard as fk
You look like Justin Bieber, but anyways, great vid.
I need it in spanish 🤓😩
Mmmmmmmmmmmmmmmmmmmmmmmmmmmmaaaaaaaaaaaaahhhhhhhh.......
This dude dresses like the local drug dealer in the hood but once he opens his mouth be instantly becomes a business prof
Kya bol rha lekhan ka boda
Can I marry you? Please?
Great