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In a world with corporate and personal taxes, and no bankruptcy costs,

jtfortwengler

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In a world with corporate and personal taxes, and no bankruptcy costs,

In a world with corporate and personal taxes, and no bankruptcy costs,

▸ a firm's value is unaffected by capital structure.

▸ there are usually gains to the firm value associated with the use of debt; however, the gains are not as large as those predicted by M&M's corporate tax model.

▸ a firm should maximize its value by maximizing its debt.

▸ a firm should borrow to the point where the marginal benefits of debt equal the marginal costs.

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Corporate Finance

Edition: 5^th

Author: Booth

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Helped a lot

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