you would read the topic theories of capital structure. Here‚ I have made these theories simplified. I hope‚ you can study these theories here and use these theories as reference. We all know that capital structure is combination of sources of funds in which we can include two main sources’ proportion. One is share capital and other is Debt. All four theories are just explaining the effect of changing the proportion of these sources on the overall cost of capital and total value of firm. If I have
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Capital Structure Stewart C. Myers The Journal of Economic Perspectives‚ Vol. 15‚ No. 2. (Spring‚ 2001)‚ pp. 81-102. Stable URL: http://links.jstor.org/sici?sici=0895-3309%28200121%2915%3A2%3C81%3ACS%3E2.0.CO%3B2-D The Journal of Economic Perspectives is currently published by American Economic Association. Your use of the JSTOR archive indicates your acceptance of JSTOR ’s Terms and Conditions of Use‚ available at http://www.jstor.org/about/terms.html. JSTOR ’s Terms and Conditions of Use
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and Economics Available online at www.managementjournal.info RESEARCH ARTICLE An Empirical Analysis of Capital Structure on Firms’ Performance in Nigeria Taiwo Adewale Muritala* Department of Economics and Financial Studies‚ Fountain University Osogbo‚ Osun State‚ Nigeria. *Correspondence E-mail: muritaiwo@yahoo.com Abstract This paper examines the optimum level of capital structure through which a firm can increase its financial performance using annual data of ten firms spanning a five-year
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Impacts of Profitability and Financial Leverage on Firm’s Capital Structure By [Your Name] [Instructor’s Name] [Institution’s Name] [Date] Declaration While conducting the proposed research work‚ I‚ being a hard-working‚ innovative and conscientious researcher‚ come up with the factual severity of consequences allied with an act of plagiarising content from others’ work. Moreover‚ I do comprehend the rules and regulations my university encompasses against submitting a plagiarised document
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Capital Structure Theories Capital Structure Capital Structure is the proportion of debt‚ preference and equity capitals in the total financing of the firm’s assets. The main objective of financial management is to maximize the value of the equity shares of the firm. Given this objective‚ the firm has to choose that financing mix/capital structure that results in maximizing the wealth of the equity shareholders. Such a capital structure is called as the optimum capital structure. At the optimum
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Chapter 12 Capital Structure and Leverage LEARNING OBJECTIVES After reading this chapter‚ students should be able to: • Explain why capital structure policy involves a trade-off between risk and return‚ and list the four primary factors that influence capital structure decisions. • Distinguish between a firm’s business risk and its financial risk. • Explain how operating leverage contributes to a firm’s business risk and conduct a breakeven analysis‚ complete with
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Exercise on Unit 2 – Theories of Capital Structure 1. Companies U & L are identical in all respect except that U is unlevered while L is levered. Company L has Rs. 20 Lacs of 8% debentures outstanding. Assume a. All MM assumptions are met b. Tax rate is 35% c. EBIT is Rs. 6 Lacs d. Equity capitalization rate of company U is 10% Find the following: a. Value of each firm according to MM approach b. Suppose Value of U is Rs. 25 Lacs and Value of L Rs. 35 Lacs. According
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Notes: Capital Structure by Kyung Hwan Shim University of New South Wales Australian School of Business School of Banking & Finance for FINS 1613 S1 2011 May 14‚ 2011 ∗ These notes are preliminary and under development. They are made available for FINS 1613 S1 2011 students only and may not be distributed or used without the author’s written consent. ∗ 1 Contents 1 Introduction 2 Financial Leverage 3 M&M Proposition I: Capital Structure Irrelevance 4 M&M Proposition II: Capital Structure
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whether pecking order or trade-off theory can give better determination on firms’ “optimal” capital structure in different scenarios. In trade-off theory‚ it helps to determine the debt proportion and maintain optimal balance in order to maximise company’s market value. However‚ pecking order theory promotes that companies tend to issue debts when company has internal financial deficit or deviation from target capital leverage. Hence‚ it shows mixed evidences such as Shyman-Sunder and Myers (1999) found
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American Home Products Corporation1. CASE SUMMARYAHP Chief Executive"I just don ’t like to owe money"‚ said William F. Laporte‚ AHP chief executive‚ when asked about his company ’s almost debt-free balance sheet and growing cash reserves. Mr. Laporte had taken over as chief executive of American Home Products in 1964. Throughout 17 subsequent years of his tenure Mr. Laporte has not changed his opinion of debt financing and AHP ’s abstinence from debt continued‚ while the growth in its cash balance
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