Glossary Words 15,17,18,25

Glossary Words 15,17,18,25 - Glossary words for 18 25...

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Glossary Chapter 15: Cost of Capital cost of equity    The return that equity investors require on their investment in the firm. cost of debt    The return that lenders require on the firm's debt. weighted average cost of capital  (WACC)    The weighted average of the cost of equity and the aftertax cost of debt. pure play approach    The use of a WACC that is unique to a particular project, based on companies  in similar lines of business. homemade leverage    The use of personal borrowing to change the overall amount of financial leverage to  which the individual is exposed.    The proposition that the value of the firm is independent of the firm's capital structure.    The proposition that a firm's cost of equity capital is a positive linear function of the firm's  capital structure. business risk    The equity risk that comes from the nature of the firm's operating activities. financial risk    The equity risk that comes from the financial policy (i.e., capital structure) of the firm.
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interest tax shield    The tax saving attained by a firm from interest expense. unlevered cost of capital    The cost of capital of a firm that has no debt. direct bankruptcy costs    The costs that are directly associated with bankruptcy, such as legal and administrative  expenses. indirect bankruptcy 
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This note was uploaded on 05/11/2008 for the course AEM 3240 taught by Professor Curtis,r. during the Spring '07 term at Cornell.

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Glossary Words 15,17,18,25 - Glossary words for 18 25...

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