Financial Management, 12th Edition by Pearson

CHAPTER 15

Capital Structure: Theory and Policy

LEARNING OBJECTIVES

• Apply Net Income and traditional approaches to capital structure decision.
• Critically explain the NOI approach.
• Illustrate the MM hypotheses of capital structure ­irrelevance without taxes with an example.
• Illustrate the arbitrage process with an example.
• Demonstrate the relevance of capital structure under the MM hypothesis with corporate taxes.
• Critically explain and illustrate Miller’s model of capital structure under corporate and personal taxes.
• Explain the trade-off and pecking order theories of capital structure.
• Discuss the impact of interest tax shield, financial distress costs, agency costs and information asymmetry on the capital structure.
• Develop a sustainable ...