Debt Benefits

Answer the following questions

  • How much value did Sealed Air’s leveraged recapitalization create for shareholders? To answer this question compute the change the Sealed Air’s market value of equity from 4/27/1989 to 4/28/1989. Your answer should be in millions, rounded to 2 decimals.
  • What is the present value of the interest tax shields created by the new subordinated notes? Assume a 34% tax rate and that the notes require annual interest payments. Your answer should be in millions rounded to 2 decimals.
  • What is the present value of the tax shields created by the new bank loan? Assume that the end of year 1989 is “year 0.” The tax rate is 34%. Your answer should be in millions rounded to 2 decimals.
  • Which of the following may account for the difference in the change in market value you computed in Question 1 and the sum of the present value of the tax shields you computed in Questions 2 and 3?
    A) All of the above
    B) Agency Benefits of Debt
    C) Bankruptcy Costs
    D) Agency Costs of Debt

Question 2

Create a matrix in which you:

  • Identify at least 3 economic trends of the health care payment system.
  • Identify ethics and compliance issues associated with those trends.

Cite 3 peer-reviewed, scholarly, or similar references to support your chosen trends and issues.

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