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Accounting

1. Railroad companies in the United States tend to have long-term, fixed rate, dollar denominated debt. Explain why.

2. 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)

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

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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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91631145

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