This chapter discusses capital structure policy and the effect of leverage on firm value. It covers:
- How leverage impacts EPS, ROE, and risk. Firms have an optimal capital structure that balances tax benefits of debt against costs of financial distress.
- M&M propositions showing that with no taxes/bankruptcy costs, capital structure does not affect value, but with taxes value increases with debt up to 100%, and with both taxes and bankruptcy costs an interior optimal exists.
- Observed capital structures differ by industry and theories like pecking order are considered.
jimmy stepanian | Capital structure | Financial Structure | decisions | Jimmy Stepanian
Capital structure is the combination of long term capital and debt resources. Examine your balance sheet and you will find that there will be three main sources of capital.
FIN 534 Week 8 Part 2 Capital Structure DecisionsSlide 1Intro.docxssuser454af01
FIN 534 Week 8 Part 2: Capital Structure Decisions
Slide 1
Introduction
Welcome to Financial Management. In this lesson we will discuss capital structure decisions.
Next slide
Slide 2
Topics
The following topics will be covered in this lesson:
A preview of capital structure issues;
Business risk and financial risk;
Capital structure theory;
Capital structure evidence and implications;
Estimating the optimal capital structure; and
Anatomy of recapitalization.
Next slide
Slide 3
A preview of capital structure issues
Managers should make capital structure decisions to maximize the intrinsic value of the firm. The firm’s capital structure is its mixture of debt and equity. While the actual levels of debt and equity may vary over time, most firms try to maintain a financing mix that is close to its target capital structure. Recall, the value of the firm’s operations is the present value of its expected future cash flows, FCF, discounted at the firm’s weighted average cost of capital, WACC. Mathematically, the value of the firm’s operations is given by the following equation:
V sub OP equals summation T equals one through infinity FCF sub T divided by the quantity one plus WACC raised to the tth power;
Where WACC equals w sub D times the quantity one minus T times R sub D plus W sub S times R sub S; and
WACC depends on the percentages of debt and common equity, W sub D and W sub S, the cost of debt, R sub D, the cost of equity, R sub S, and the corporate tax rate T. The only way any decision can change the firm’s value is by changing either FCF or its cost of capital. Debtholders’ claim on the firm’s cash flows rank ahead of the stockholders’ claim because they have a residual claim on the cash flows after debtholders’ are paid.
The fixed claim of debtholders increases the cost of equity, R sub S, because their residual claim becomes riskier. Interest expense is tax deductible which reduces the firm’s taxable income and therefore its tax bill. The tax reduction reduces the after-tax cost of debt which results in more income available to debtholders and other investors.
When the firm increases its debt level the probability of financial distress or bankruptcy increases. This results in an increased pretax cost of debt, R sub D, because debt-holders will require a higher interest rate. The net impact on the WACC is indeterminate because both R sub D and R sub S change because it is a weighted average of relatively low-cost debt and relatively high-cost equity. The risk of bankruptcy can reduce FCF and the value of the firm. When the risk of bankruptcy increases, customers may make purchases from another firm and hence sales decline which reduces net operating profit as well as FCF. Additionally any type of financial distress negatively impacts the productivity of managers and employees and reduces net operating profit after taxes, NOPAT, and FCF. Moreover the firm experiences a reduction in accounts payable and results in an ...
This presentation provides an update on both recently issued and forthcoming pronouncements of the Financial Accounting Standards Board (FASB). Through this presentation, you should be able to identify what changes are effective for your 2015 financial statements, including changes you may choose to early adopt.
Payment cycles identification and cash flow improvement 2008 and 2020 crisisWaldemar Jackiewicz
The idea of Financial process and supporting IT System to Identify the Payment Cycles, reduction of Payment Bottlenecks and Improvement of Cash Flows.
Scope:
1. background
2. definition of payments cycle
3. reason for fining and reduction
4. technical solution
5. financial background
- cash flow
- cash liquidity
- factoring
- tax maintenance
6. conclusions
Understanding Financial Accounting 3rd Canadian Edition by Christopher D. Bur...ssuserf63bd7
https://qidiantiku.com/solution-manual-for-understanding-financial-accounting-3rd-canadian-edition-by-christopher-d-burnley.shtml
Full download please contact u84757@protonmail.com or qidiantiku.com
Financial and Managerial Accounting for MBAs 4th Edition Easton Test BankQuinnWheelerss
Full download : https://alibabadownload.com/product/financial-and-managerial-accounting-for-mbas-4th-edition-easton-test-bank/ Financial and Managerial Accounting for MBAs 4th Edition Easton Test Bank , Financial and Managerial Accounting for MBAs,Easton,4th Edition,Test Bank
Introduction to AI for Nonprofits with Tapp NetworkTechSoup
Dive into the world of AI! Experts Jon Hill and Tareq Monaur will guide you through AI's role in enhancing nonprofit websites and basic marketing strategies, making it easy to understand and apply.
jimmy stepanian | Capital structure | Financial Structure | decisions | Jimmy Stepanian
Capital structure is the combination of long term capital and debt resources. Examine your balance sheet and you will find that there will be three main sources of capital.
FIN 534 Week 8 Part 2 Capital Structure DecisionsSlide 1Intro.docxssuser454af01
FIN 534 Week 8 Part 2: Capital Structure Decisions
Slide 1
Introduction
Welcome to Financial Management. In this lesson we will discuss capital structure decisions.
Next slide
Slide 2
Topics
The following topics will be covered in this lesson:
A preview of capital structure issues;
Business risk and financial risk;
Capital structure theory;
Capital structure evidence and implications;
Estimating the optimal capital structure; and
Anatomy of recapitalization.
Next slide
Slide 3
A preview of capital structure issues
Managers should make capital structure decisions to maximize the intrinsic value of the firm. The firm’s capital structure is its mixture of debt and equity. While the actual levels of debt and equity may vary over time, most firms try to maintain a financing mix that is close to its target capital structure. Recall, the value of the firm’s operations is the present value of its expected future cash flows, FCF, discounted at the firm’s weighted average cost of capital, WACC. Mathematically, the value of the firm’s operations is given by the following equation:
V sub OP equals summation T equals one through infinity FCF sub T divided by the quantity one plus WACC raised to the tth power;
Where WACC equals w sub D times the quantity one minus T times R sub D plus W sub S times R sub S; and
WACC depends on the percentages of debt and common equity, W sub D and W sub S, the cost of debt, R sub D, the cost of equity, R sub S, and the corporate tax rate T. The only way any decision can change the firm’s value is by changing either FCF or its cost of capital. Debtholders’ claim on the firm’s cash flows rank ahead of the stockholders’ claim because they have a residual claim on the cash flows after debtholders’ are paid.
The fixed claim of debtholders increases the cost of equity, R sub S, because their residual claim becomes riskier. Interest expense is tax deductible which reduces the firm’s taxable income and therefore its tax bill. The tax reduction reduces the after-tax cost of debt which results in more income available to debtholders and other investors.
When the firm increases its debt level the probability of financial distress or bankruptcy increases. This results in an increased pretax cost of debt, R sub D, because debt-holders will require a higher interest rate. The net impact on the WACC is indeterminate because both R sub D and R sub S change because it is a weighted average of relatively low-cost debt and relatively high-cost equity. The risk of bankruptcy can reduce FCF and the value of the firm. When the risk of bankruptcy increases, customers may make purchases from another firm and hence sales decline which reduces net operating profit as well as FCF. Additionally any type of financial distress negatively impacts the productivity of managers and employees and reduces net operating profit after taxes, NOPAT, and FCF. Moreover the firm experiences a reduction in accounts payable and results in an ...
This presentation provides an update on both recently issued and forthcoming pronouncements of the Financial Accounting Standards Board (FASB). Through this presentation, you should be able to identify what changes are effective for your 2015 financial statements, including changes you may choose to early adopt.
Payment cycles identification and cash flow improvement 2008 and 2020 crisisWaldemar Jackiewicz
The idea of Financial process and supporting IT System to Identify the Payment Cycles, reduction of Payment Bottlenecks and Improvement of Cash Flows.
Scope:
1. background
2. definition of payments cycle
3. reason for fining and reduction
4. technical solution
5. financial background
- cash flow
- cash liquidity
- factoring
- tax maintenance
6. conclusions
Understanding Financial Accounting 3rd Canadian Edition by Christopher D. Bur...ssuserf63bd7
https://qidiantiku.com/solution-manual-for-understanding-financial-accounting-3rd-canadian-edition-by-christopher-d-burnley.shtml
Full download please contact u84757@protonmail.com or qidiantiku.com
Financial and Managerial Accounting for MBAs 4th Edition Easton Test BankQuinnWheelerss
Full download : https://alibabadownload.com/product/financial-and-managerial-accounting-for-mbas-4th-edition-easton-test-bank/ Financial and Managerial Accounting for MBAs 4th Edition Easton Test Bank , Financial and Managerial Accounting for MBAs,Easton,4th Edition,Test Bank
Introduction to AI for Nonprofits with Tapp NetworkTechSoup
Dive into the world of AI! Experts Jon Hill and Tareq Monaur will guide you through AI's role in enhancing nonprofit websites and basic marketing strategies, making it easy to understand and apply.
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
A workshop hosted by the South African Journal of Science aimed at postgraduate students and early career researchers with little or no experience in writing and publishing journal articles.
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Dr. Vinod Kumar Kanvaria
Exploiting Artificial Intelligence for Empowering Researchers and Faculty,
International FDP on Fundamentals of Research in Social Sciences
at Integral University, Lucknow, 06.06.2024
By Dr. Vinod Kumar Kanvaria
A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
2. Key Concepts and Skills
• Understand the effect of financial
leverage on cash flows and the cost
of equity
• Understand the impact of taxes and
bankruptcy on capital structure
choice
• Understand the basic components of
the bankruptcy process
16-2
3. Chapter Outline
• The Capital Structure Question
• The Effect of Financial Leverage
• Capital Structure and the Cost of Equity Capital
• M&M Propositions I and II with Corporate Taxes
• Bankruptcy Costs
• Optimal Capital Structure
• The Pie Again
• The Pecking-Order Theory
• Observed Capital Structures
• A Quick Look at the Bankruptcy Process
16-3
4. Capital Restructuring
• We are going to look at how changes in capital
structure affect the value of the firm, all else equal
• Capital restructuring involves changing the amount
of leverage a firm has without changing the firm’s
assets
• The firm can increase leverage by issuing debt
and repurchasing outstanding shares
• The firm can decrease leverage by issuing new
shares and retiring outstanding debt
16-4
5. Choosing a Capital
Structure
• What is the primary goal of financial
managers?
– Maximize stockholder wealth
• We want to choose the capital structure that
will maximize stockholder wealth
• We can maximize stockholder wealth by
maximizing the value of the firm or
minimizing the WACC
16-5
6. The Effect of Leverage
• How does leverage affect the EPS and ROE of a
firm?
• When we increase the amount of debt financing,
we increase the fixed interest expense
• If we have a really good year, then we pay our
fixed cost and we have more left over for our
stockholders
• If we have a really bad year, we still have to pay
our fixed costs and we have less left over for our
stockholders
• Leverage amplifies the variation in both EPS and
ROE
16-6
7. Example: Financial Leverage,
EPS and ROE – Part I
• We will ignore the effect of taxes at this
stage
• What happens to EPS and ROE when we
issue debt and buy back shares of stock?
16-7
8. Example: Financial Leverage,
EPS and ROE – Part II
• Variability in ROE
– Current: ROE ranges from 6% to 20%
– Proposed: ROE ranges from 2% to 30%
• Variability in EPS
– Current: EPS ranges from $0.60 to $2.00
– Proposed: EPS ranges from $0.20 to $3.00
• The variability in both ROE and EPS
increases when financial leverage is
increased
16-8
9. Break-Even EBIT
• Find EBIT where EPS is the same under
both the current and proposed capital
structures
• If we expect EBIT to be greater than the
break-even point, then leverage may be
beneficial to our stockholders
• If we expect EBIT to be less than the
break-even point, then leverage is
detrimental to our stockholders
16-9
11. Example: Homemade Leverage
and ROE
• Current Capital
Structure
• Investor borrows $500
and uses $500 of her own
to buy 100 shares of stock
• Payoffs:
– Recession: 100(0.60) -
.1(500) = $10
– Expected: 100(1.30) -
.1(500) = $80
– Expansion: 100(2.00) -
.1(500) = $150
• Mirrors the payoffs from
purchasing 50 shares of
the firm under the
proposed capital structure
• Proposed Capital
Structure
• Investor buys $250 worth of
stock (25 shares) and $250
worth of bonds paying 10%.
• Payoffs:
– Recession: 25(.20) +
.1(250) = $30
– Expected: 25(1.60) +
.1(250) = $65
– Expansion: 25(3.00) +
.1(250) = $100
• Mirrors the payoffs from
purchasing 50 shares under
the current capital structure
16-11
12. Capital Structure Theory
• Modigliani and Miller (M&M)Theory of
Capital Structure
– Proposition I – firm value
– Proposition II – WACC
• The value of the firm is determined by the
cash flows to the firm and the risk of the
assets
• Changing firm value
– Change the risk of the cash flows
– Change the cash flows
16-12
13. Capital Structure Theory Under
Three Special Cases
• Case I – Assumptions
– No corporate or personal taxes
– No bankruptcy costs
• Case II – Assumptions
– Corporate taxes, but no personal taxes
– No bankruptcy costs
• Case III – Assumptions
– Corporate taxes, but no personal taxes
– Bankruptcy costs
16-13
14. Case I – Propositions I and II
• Proposition I
– The value of the firm is NOT affected by
changes in the capital structure
– The cash flows of the firm do not
change; therefore, value doesn’t
change
• Proposition II
– The WACC of the firm is NOT affected
by capital structure
16-14
15. Case I - Equations
• WACC = RA = (E/V)RE + (D/V)RD
• RE = RA + (RA – RD)(D/E)
– RA is the “cost” of the firm’s business risk, i.e.,
the risk of the firm’s assets
– (RA – RD)(D/E) is the “cost” of the firm’s
financial risk, i.e., the additional return required
by stockholders to compensate for the risk of
leverage
16-15
17. Case I - Example
• Data
– Required return on assets = 16%; cost of debt = 10%;
percent of debt = 45%
• What is the cost of equity?
– RE = 16 + (16 - 10)(.45/.55) = 20.91%
• Suppose instead that the cost of equity is 25%, what
is the debt-to-equity ratio?
– 25 = 16 + (16 - 10)(D/E)
– D/E = (25 - 16) / (16 - 10) = 1.5
• Based on this information, what is the percent of
equity in the firm?
– E/V = 1 / 2.5 = 40%
16-17
18. The CAPM, the SML and
Proposition II
• How does financial leverage affect systematic
risk?
• CAPM: RA = Rf + A(RM – Rf)
– Where A is the firm’s asset beta and measures the
systematic risk of the firm’s assets
• Proposition II
– Replace RA with the CAPM and assume that the debt is
riskless (RD = Rf)
– RE = Rf + A(1+D/E)(RM – Rf)
16-18
19. Business Risk and
Financial Risk
• RE = Rf + A(1+D/E)(RM – Rf)
• CAPM: RE = Rf + E(RM – Rf)
– E = A(1 + D/E)
• Therefore, the systematic risk of the stock
depends on:
– Systematic risk of the assets, A, (Business
risk)
– Level of leverage, D/E, (Financial risk)
16-19
20. Case II – Cash Flow
• Interest is tax deductible
• Therefore, when a firm adds debt, it
reduces taxes, all else equal
• The reduction in taxes increases the
cash flow of the firm
• How should an increase in cash
flows affect the value of the firm?
16-20
21. Case II - Example
Unlevered Firm Levered Firm
EBIT 5,000 5,000
Interest 0 500
Taxable
Income
5,000 4,500
Taxes (34%) 1,700 1,530
Net Income 3,300 2,970
CFFA 3,300 3,470
16-21
23. Case II – Proposition I
• The value of the firm increases by the
present value of the annual interest tax
shield
– Value of a levered firm = value of an unlevered
firm + PV of interest tax shield
– Value of equity = Value of the firm – Value of
debt
• Assuming perpetual cash flows
– VU = EBIT(1-T) / RU
– VL = VU + DTC
16-23
24. Example: Case II –
Proposition I
• Data
– EBIT = 25 million; Tax rate = 35%; Debt = $75
million; Cost of debt = 9%; Unlevered cost of
capital = 12%
• VU = 25(1-.35) / .12 = $135.42 million
• VL = 135.42 + 75(.35) = $161.67 million
• E = 161.67 – 75 = $86.67 million
16-24
26. Case II – Proposition II
• The WACC decreases as D/E increases
because of the government subsidy on
interest payments
– RA = (E/V)RE + (D/V)(RD)(1-TC)
– RE = RU + (RU – RD)(D/E)(1-TC)
• Example
– RE = 12 + (12-9)(75/86.67)(1-.35) = 13.69%
– RA = (86.67/161.67)(13.69) + (75/161.67)(9)(1-
.35)
RA = 10.05%
16-26
27. Example: Case II –
Proposition II
• Suppose that the firm changes its capital
structure so that the debt-to-equity ratio
becomes 1.
• What will happen to the cost of equity
under the new capital structure?
– RE = 12 + (12 - 9)(1)(1-.35) = 13.95%
• What will happen to the weighted average
cost of capital?
– RA = .5(13.95) + .5(9)(1-.35) = 9.9%
16-27
29. Case III
• Now we add bankruptcy costs
• As the D/E ratio increases, the probability of
bankruptcy increases
• This increased probability will increase the
expected bankruptcy costs
• At some point, the additional value of the interest
tax shield will be offset by the increase in expected
bankruptcy cost
• At this point, the value of the firm will start to
decrease, and the WACC will start to increase as
more debt is added
16-29
30. Bankruptcy Costs
• Direct costs
– Legal and administrative costs
– Ultimately cause bondholders to incur
additional losses
– Disincentive to debt financing
• Financial distress
– Significant problems in meeting debt
obligations
– Firms that experience financial distress do not
necessarily file for bankruptcy
16-30
31. More Bankruptcy Costs
• Indirect bankruptcy costs
– Larger than direct costs, but more difficult to measure
and estimate
– Stockholders want to avoid a formal bankruptcy filing
– Bondholders want to keep existing assets intact so they
can at least receive that money
– Assets lose value as management spends time worrying
about avoiding bankruptcy instead of running the
business
– The firm may also lose sales, experience interrupted
operations and lose valuable employees
16-31
34. Conclusions
• Case I – no taxes or bankruptcy costs
– No optimal capital structure
• Case II – corporate taxes but no bankruptcy costs
– Optimal capital structure is almost 100% debt
– Each additional dollar of debt increases the cash
flow of the firm
• Case III – corporate taxes and bankruptcy costs
– Optimal capital structure is part debt and part
equity
– Occurs where the benefit from an additional dollar
of debt is just offset by the increase in expected
bankruptcy costs
16-34
36. Managerial
Recommendations
• The tax benefit is only important if the firm
has a large tax liability
• Risk of financial distress
– The greater the risk of financial distress, the
less debt will be optimal for the firm
– The cost of financial distress varies across
firms and industries, and as a manager you
need to understand the cost for your industry
16-36
38. The Value of the Firm
• Value of the firm = marketed claims +
nonmarketed claims
– Marketed claims are the claims of stockholders and
bondholders
– Nonmarketed claims are the claims of the government
and other potential stakeholders
• The overall value of the firm is unaffected by
changes in capital structure
• The division of value between marketed claims
and nonmarketed claims may be impacted by
capital structure decisions
16-38
39. The Pecking-Order Theory
• Theory stating that firms prefer to issue
debt rather than equity if internal financing
is insufficient.
– Rule 1
• Use internal financing first
– Rule 2
• Issue debt next, new equity last
• The pecking-order theory is at odds with
the tradeoff theory:
– There is no target D/E ratio
– Profitable firms use less debt
– Companies like financial slack 16-39
40. Observed Capital Structure
• Capital structure does differ by industry
• Differences according to Cost of Capital
2008 Yearbook by Ibbotson Associates,
Inc.
– Lowest levels of debt
• Computers with 5.61% debt
• Drugs with 7.25% debt
– Highest levels of debt
• Cable television with 162.03% debt
• Airlines with 129.40% debt
16-40
41. Work the Web Example
• You can find information about a
company’s capital structure relative
to its industry, sector and the S&P
500 at Reuters
• Click on the web surfer to go to the
site
– Choose a company and get a quote
– Choose Ratio Comparisons
16-41
42. Bankruptcy Process – Part I
• Business failure – business has
terminated with a loss to creditors
• Legal bankruptcy – petition federal
court for bankruptcy
• Technical insolvency – firm is unable
to meet debt obligations
• Accounting insolvency – book value
of equity is negative
16-42
43. Bankruptcy Process – Part II
• Liquidation
– Chapter 7 of the Federal Bankruptcy Reform
Act of 1978
– Trustee takes over assets, sells them and
distributes the proceeds according to the
absolute priority rule
• Reorganization
– Chapter 11 of the Federal Bankruptcy Reform
Act of 1978
– Restructure the corporation with a provision to
repay creditors
16-43
44. Quick Quiz
• Explain the effect of leverage on EPS and ROE
• What is the break-even EBIT, and how do we
compute it?
• How do we determine the optimal capital
structure?
• What is the optimal capital structure in the three
cases that were discussed in this chapter?
• What is the difference between liquidation and
reorganization?
16-44
45. Ethics Issues
• Suppose managers of a firm know that the
company is approaching financial distress.
– Should the managers borrow from creditors and issue a
large one-time dividend to shareholders?
– How might creditors control this potential transfer of
wealth?
16-45
46. Comprehensive Problem
• Assuming perpetual cash flows in
Case II - Proposition I, what is the
value of the equity for a firm with
EBIT = $50 million, Tax rate = 40%,
Debt = $100 million, cost of debt =
9%, and unlevered cost of capital =
12%?
16-46