1. The Financing Decision CHAPTER 6 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

6. TABLE 6.1 Debt Financing Increases Expected Return and Risk to Owners

11. FIGURE 6-1 Leverage Increases Risk and Expected Return

13. TABLE 6-2 Selected Information about Scotts Miracle-Gro Company’s Recapitalization Decision ($ millions)

16. TABLE 6-3 Scotts Miracle-Gro Company Info ($ millions)

18. TABLE 6-4 Average Nonfinancial Debt Ratios , 2002-2007 Industry Debt Ratios 2004

19. TABLE 6-5 Median Values of Key Ratios by Standard & Poor’s Rating Category

22. TABLE 6-6 Scotts Miracle-Gro Company’s Partial Pro Forma Income Statements in 2007 under Bust and Boom Conditions ($ millions except EPS)

24. FIGURE 6-2 Range of Earnings Chart for Scotts Miracle-Gro Company

27. FIGURE 6.3 The Higgins 5-Factor Model for Financing Decisions

33. TABLE 6-7 An Investment That Benefits Owners but Hurts the Firm and Its Creditors ($millions)

57. TABLE 6A-1 In the Absence of Taxes, Debt Financing Affects Neither Income nor Firm Value; In the Presence of Taxes, Prudent Debt Financing Increases Income and Firm Value

58. TABLE 6A-1 ( Continued )