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Will a High Debt Ratio Lower Cost of Capital?

What policies and payments does a firm's dividend policy consist of? Why is determining dividend policy more difficult today than in past decades?
Payments can be in the form of cash, or stock

Why is the debt level that maximizes a firm's EPS generally higher than the debt level that maximizes its stock price? The more leverage the company has allows them to produce more to boost earnings

A utility company is supposed to be allowed charge prices high enough to cover all costs, including the cost of capital. PUC's are supposed to take actions to stimulate companies to operate efficiently. A particular utilities debt ratio was 33%. Some argued that a higher debt ratio would lower the firms cost of capital and permit it to charge lower rates. Can the optimal debt ratio be determined- discuss pros and cons?

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What policies and payments does a firm's dividend policy consist of? Why is determining dividend policy more difficult today than in past decades?
Payments can be in the form of cash, or stock
Yes, the dividend payment consists of cash or stock. Determining Dividend policy is becoming difficult as the need of funds cannot be predicted with certainty. This is because of growing competition.

Why is the debt level that maximizes a firm EPS generally higher than the debt level that maximizes its stock price? The more leverage the company has allows them to produce more to boost earnings
A firm's optimal capital structure is that mixture of debt and equity than minimizes its weighted average cost of capital (WACC). Since the after-tax cost of debt is lower than equity for many corporations, why not use debt only or mostly? It turns out that, while debt reduces a company's tax liability because interest payments are deductible expenses, increasing amounts of debt raise both the cost of ...

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