Do these types of leverage complement each other why

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

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: eas of financial decision making because of its interrelationship with other financial decision variables.13 Poor capital structure decisions can result in a high cost of capital, thereby lowering the NPVs of projects and making more of them unacceptable. Effective capital structure decisions can lower the cost of capital, resulting in higher NPVs and more acceptable projects—and thereby increasing the value of the firm. This section links together many of the concepts presented in Chapters 4, 5, 6, 7, and 11 and the discussion of leverage in this chapter. Types of Capital All of the items on the right-hand side of the firm’s balance sheet, excluding current liabilities, are sources of capital. The following simplified balance sheet illustrates the basic breakdown of total capital into its two components, debt capital and equity capital. 13. Of course, although capital structure is financially important, it, like many business decisions, is generally not so important as the firm’s prod...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online