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Unformatted text preview: criteria. 7. Under what circumstances would changing a company’s capital structure affect its value? A company’s capital structure can be represented by its weighted average cost of capital (WACC). There is an equilibrium proportion of equity and debt to have a minimum WACC. A company would not be able to create value by moving away from the equilibrium point unless there is a change on the tax law because the interest payment of debt is considered tax deductible. If the tax law has changed, then moving the capital structure toward the equilibrium would create value....
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This note was uploaded on 06/06/2011 for the course FINA 4210 taught by Professor Staff during the Spring '08 term at University of Georgia Athens.
- Spring '08
- Corporate Finance