Chapter 17 - Capital Structure Chapter 17 Yihui Wang...

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Capital Structure -- Chapter 17 h Yihui Wang Capital Structure
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Main Issues The Effect of Leverage Capital Structure and Firm Value (MM Proposition I) Capital Structure and Cost of Capital (MM Proposition II) Add corporate taxes Add bankruptcy costs Optimal Capital Structure Capital Structure 2
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The Capital Structure Questions How should companies finance their operations? Does our investment activities depend upon our financing policies? Does a particular mix of debt/equity result in a h h f l higher firm value? Is there an optimal mix of debt and equity that results i h hi h ibl fi l ? in the highest possible firm value? Capital Structure 3
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