June 2013
Intermediate to advanced
272 pages
7h 6m
English
Content preview from Capital Structure Decisions: Evaluating Risk and UncertaintyBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
Chapter Four
Maximising Value with Capital Structure Decisions
VALUATION RELATIONSHIPS ARE THE foundation of all financial decisions. They are the first concepts introduced in most corporate finance books. The relationship between capital structure and firm value has long been debated since the works of Durand (1958) and Modigliani and Miller (1958 and 1963) were published. The existence of an optimal capital structure and its effect on the value of a firm are so fundamental to the logic of financing that this relationship goes without saying.
Given the very fundamental nature of financing, as discussed in Chapter 2, the cost of capital gives the basis for valuation of each and every action of a firm. Values in a business are created by investing in fixed assets that generate cash flow in the form of revenue and income and that grow with time. One way to create value is to generate capital from the firm’s operations. Value creation is a slow process of investing and reinvesting free cash flows into profitable and high-return ventures. Borrowing is necessary when equity contributions and earnings are insufficient to support an investment. The mix and cost of debt and equity can make an investment viable or unviable. The question for firms is: How to decide this mix? In this chapter, we discuss some traditional tenets that created the relationship between firm value and capital structure. Firm value can be magnified by the use of different sources of financing.
The method of magnifying ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.