Unformatted text preview: nd return. LEARNING GOALS
LG1 LG2 LG3 LG4 LG5 LG6 Discuss the role of breakeven
analysis, the operating breakeven
point, and the effect of changing
costs on it.
Understand operating, financial, and
total leverage and the relationships
Describe the types of capital, external
assessment of capital structure, the
capital structure of non-U.S. firms,
and capital structure theory.
Explain the optimal capital structure
using a graphical view of the firm’s
cost-of-capital functions and a zerogrowth valuation model.
Discuss the EBIT–EPS approach to
Review the return and risk of
alternative capital structures, their
linkage to market value, and other
important considerations related to
capital structure. 421 422 PART 4 Long-Term Financial Decisions everage involves the use of fixed costs to magnify returns. Its use in the capital
structure of the firm has the potential to increase its return and risk. Leverage
and capital structure are closely related concepts that are linked to capital budgeting decisions through the cost of capi...
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