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Ch_15

Ch_15

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Published by Arpan Raha

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Categories:Types, School Work
Published by: Arpan Raha on Feb 02, 2011
Copyright:Attribution Non-commercial

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11/14/2011

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CAPITAL STRUCTURE: THEORY ANDPOLICY
CHAPTER15
 
L
EARNING OBJECTIVES
Understand the theories of the relationship between capital structureand the value of the firm
Highlight the differences between the Modigliani-Miller view andthe traditional view on the relationship between capital
structure and the cost of capital and the value of the firm
Focus on the interest tax shield advantage of debt as well as itsdisadvantage in terms of costs of financial distress
Explain the impact of agency costs on capital structure
Discuss the information asymmetry and the pecking order theory of capital structure
Study the determinants of capital structure in practice
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INTRODUCTION
T
he objective of a firm should be directed towardsthe maximization of the firm¶s value.
T
he capital structure or financial leverage decisionshould be examined from the point of its impact onthe value of the firm.
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