Define the optimal fraction of debt and the growth rate of a firm. What is the relationship between the two?© BrainMass Inc. brainmass.com October 25, 2018, 8:18 am ad1c9bdddf
The optimal fraction of debt has an inverse relationship with a firm. As the firm grows larger, the optimal fraction of debt decreases. When the firm is smaller, the optimal fraction of debt remains large because the firm relies more ...
This solution explains the optimal fraction of debt and growth rate of a firm. The relationship between both elements is also discussed.
Capital Structure, MM Proposition, Leveraged Recapitalization & Optimal Fraction of Debt
1. What type of capital structure should a firm choose and why? In you answer, be sure to include capital structure fallacies and their effects on a firm's decision.
2. Define and discuss MM Proposition I with it's implications, and the roles of homemade leverage and the Law of One Price in the development of the proposition.
3. What is leveraged recapitalization and what effects does it have on the value of equity?
4. Define the optimal fraction of debt and the growth rate of a firm. What is the relationship between the two?
I need original notes that exceed 250 words that will help me answer the questions below:
1. Define the three conditions that make up a perfect capital market, and then compare and contrast the effects of perfect capital markets and imperfect capital markets on value. Can they create or destroy value? Explain.
2. Define EBIT and discuss why the optimal level of leverage from a tax-saving perspective is the level at which interest equals EBIT. Does this have a connection with under-leveraging corporations,both domestically and internationally?View Full Posting Details