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BUS 5111 UNIT 5 PORTFOLIO.docx - University of the People...

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University of the PeopleBUS 5111: Financial ManagementDr. Stacy StrebelPortfolio Activity Unit 5March, 2021In accordance with the signaling model by Ross (1977) “an increase in gearing indicates, in termof a company's prospective cash flows, a positive signal to external investors. hence, due to thehigher risk of monetary anguish, companies with less positive market prospective tend to avoidadditional financial obligations.This implies that an increasing indebtedness means a better quality of business and thus bettervaluation. This leads, in turn, to the idea that the company management can influence a firm'svalue by changing its capital structure.If capital structure can effect value, how can firms identify an optimal capital structure what isgoing to it appear as if ? it's that blend of debt and equity that maximizes the worth of a firm and,at an equivalent time, minimize overall cost of capital. In their seminal article, published in 1958and 1963, Modigilani and Miller argue that under certain assumptions the values of a firm is

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Term
Fall
Professor
Dr. Schmidt
Tags
Finance, Corporate Finance, Company B, Company B Company, Company A

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