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Leverage and value of investments

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Please hep with the following problems.

1. A firm's capital structure represents their view on leverage. With corporate taxes, discuss why a firm's value can be higher with leverage even though its earnings are lower.

2. Suppose Google would like to attract more long term investors. What dividend policies should it consider? How do you think this would reflect in the value of the company?

3. Discuss the approach to estimating the value of investment.

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Solution Summary

This solution helps with a finance problem. The questions involve concepts of capital structure, company investments, and estimating value of investment.

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ANSWERS

1. A firm's capital structure represents their view on leverage. With corporate taxes, discuss why a firm's value can be higher with leverage even though its earnings are lower.

A firm's capital structure is the mix of debt and equity financing that a company uses to finance its resources and operations. The debt portion of this financing incurs interest ...

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