Principles of Corporate Finance_ 12th Edition

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490 Part Five Payout Policy and Capital Structure


bre44380_ch18_460-490.indd 490 10/05/15 12:53 PM


You can download data for the following questions from the Yahoo! Finance website (www.
finance.yahoo.com).


  1. Look up Johnson & Johnson on Yahoo! Finance.
    a. Recalculate book- and market-value balance sheets using the most recent available finan-
    cial information. Use the same format as for Table 18.4.
    b. Track Johnson & Johnson’s long-term debt and debt ratio over the last five years (you
    will need to go to the company’s website to do this). How have they changed? Does
    it appear that the company has a stable target debt ratio? Do you see any evidence of
    pecking-order financing?
    c. How much has the company spent to repurchase its own shares? Would the trade-off
    theory predict share repurchases for a conservatively financed company like Johnson &
    Johnson?

  2. Select three or four companies from the Yahoo! Finance database. Estimate how much more
    these companies could borrow before they would exhaust taxable profits.


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