11 11 11 Review Session 6 _Concept Review_

11 11 11 Review Session 6 _Concept Review_ - Capital...

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Unformatted text preview: Capital Structure in Perfect Markets Capital Structure in Real World Valuation with Leverage Managerial Finance: Review Session 6 TA: Pablo Villanueva November 11, 2011 Capital Structure in Perfect Markets Capital Structure in Real World Valuation with Leverage Agenda for Today 1. Capital Structure in Perfect Markets • Modigliani & Miller • Assumptions • Intuition 2. Capital Structure in Real World • Reasons why MM fails • Tax shields • Corporate Taxes • Personal Taxes • Effective Tax Advantage of Debt 3. Valuation with Leverage • Weighted Average Cost of Capital Method • Adjusted Present Value Method 4. Exercises Capital Structure in Perfect Markets Capital Structure in Real World Valuation with Leverage Modigliani & Miller • Capital Structure is the way the assets of the firm are financed (a % with equity and a % with debt) • Assets=Value of Debt+Value of Equity • Modigliani & Miller • In a perfect capital market, the total value of a firm is equal to the market value of total cash flows generated by its assets...
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This note was uploaded on 01/08/2012 for the course MS&E 245G taught by Professor Perez-gonzalas during the Fall '11 term at Stanford.

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11 11 11 Review Session 6 _Concept Review_ - Capital...

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