The following table summarizes the results of regressing changes in firm value against changes in interest rates

Question:

The following table summarizes the results of regressing changes in firm value against changes in interest rates for six major footwear companies:

Change in Firm Value = a + b(Change in Long − Term Interest Rates)

a. How would you use these results to design debt for each of these companies?
b. How would you explain the wide variation across companies? Would you use the average across the companies in any way?

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Applied Corporate Finance

ISBN: 978-1118808931

4th edition

Authors: Aswath Damodaran

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Question Posted: Apr 15, 2015 09:08 AM

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The following table summarizes the results of regressing changes in firm value against changes in interest rates

Question:

Company LA Gear Nike Stride Rite Timberland Reebok Wolverine Intercept (a) -0.07 0.05 0.01 0.06 0.04 0.06 Slope Coefficient (b) -4.74 -11.03 -8.08 -22.50 -4.79 -2.42

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a It can be argued that the slope coefficient is a measure of the dur...View the full answer

Applied Corporate Finance

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