Financial Leverage Summary - financial risk increases as...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Effects of Financial Leverage: Consensus View • total firm risk = business (operating) risk + financial risk • business risk (leverage) is given; the focus here is on financial leverage
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: financial risk increases as debt/value (= debt/assets) increases Cost of Capital (%) D/V* Debt/Value Ratio (%) Value of Firm, V ($) D* Debt ($) WACC r S Vu V L r d (1 T c )...
View Full Document

Ask a homework question - tutors are online