Session 19 Optimizing Financing Mix Continued

Summary

In this class, we started by tying up loose ends on the cost of capital approach, starting with why moving to the optimal changes ... Evaluate why moving to the optimal We started this class by completing the debt trade off, by bringing in agency costs and Look at the Adjusted Present Value (APV) approach as well as sector averages as guides to the optimal Look at the pluses & minuses of using debt, as opposed to equity. Describe the cost of capital approach to deriving the optimal Examine whether & how quickly a firm that has too much or too little debt should move to its "right'