L_21_ - Chapter Outline Lecture 21 Chapter 17 Chapter...

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Chapter Outline Lecture 21 Chapter 17 Chapter Organization Capital Structure with and without Taxes (review) Capital Structure with Taxes and Financial Distress
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Capital Structure, Cost of Capital, and the Value of the Firm What is the optimal capital structure? Optimal capital structure Optimal capital structure
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Effect of Leverage When EBIT is high (low), financial leverage___________________. Financial Leverage ___________________________. The variability of EPS and ROE ____________________________. Leverage____________________.
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Financial leverage and firm value: Proposition I With the absence of Taxes Capital restructurings don’t create value . V L = And WACC L =
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The cost of equity and financial leverage: Proposition II MM Prop. II R E = Cost of equity has two parts 1. 2.
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Taxes, the WACC, and Proposition II Debt-equity ratio, D/E Cost of capital (%) R D
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This note was uploaded on 06/22/2011 for the course FINA 365 taught by Professor Koch during the Spring '08 term at South Carolina.

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L_21_ - Chapter Outline Lecture 21 Chapter 17 Chapter...

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