Chapter 14 Capital Structure and Leverage Learning Objectives after(prenominal) reading this chapter, students should be able to: ? Explain why go past complex body part insurance policy involves a trade-off mingled with attempt and return, and list the tetrad primary factors that influence seat of government structure decisions. ? Distinguish between a solids stock jeopardize and its fiscal risk. ? Explain how operating leverage contrisolelyes to a mansions business risk and conduct a breakeven analysis, complete with a breakeven chart. ? Define fiscal leverage and apologize its work on expected ROE, expected EPS, and the risk borne by stockholders. ? before long explain what is meant by a firms optimal capital structure. ? Specify the effect of financial leverage on of import using the Hamada compare, and transform this equation to calculate a firms unlevered beta, bU. ? Illustrate through with(predicate) a graph the premiums for financial risk and business risk at polar debt levels. ? constitute the assumptions under which Modigliani and Miller turn out that a firms value is unaffected by its capital structure, then explain trade-off theory, signaling theory, and the effect of taxes and bankruptcy costs on capital structure.
? List a number of factors or applicative considerations firms generally consider when do capital structure decisions. ? Briefly explain the extent that capital structure varies across industries, idiosyncratic firms in each industry, and different countries. Lecture Suggestions This chapter is rather long, but it is also modular, hence sections can be omitted wit hout loss of continuity. Therefore, if you! argon experiencing a time crunch, you could spring selected sections. What we cover, and the way we cover it, can be gather upn by scanning the slides and Integrated Case dissolvent for Chapter 14, which appears at the give up of this chapter solution. For other suggestions about the lecture, please see the Lecture Suggestions in Chapter 2, where we describe how we...
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