Chapter 16 Capital Structure
Learning Objectives
LO1 Explain why borrowing rates are different based on ability to repay loans.
LO2 Demonstrate the benefits of borrowing.
LO3 Calculate the break-even EBIT for different capital structures.
LO4 Explain the appropriate borrowing strategy under the pecking order hypothesis.
LO5 Develop the arguments for the optimal capital structure in a world of no taxes and no bankruptcy and in a world of corporate taxes with no bankruptcy costs.
LO6 Understand the static theory of capital structure and the trade-off between the benefits of the tax shield and the cost of bankruptcy.
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