Chpt 7 Flashcards
1
Q
Equity B
A
Geared B
2
Q
Asset B
A
Ungraded B
3
Q
Traditional theory
A
Cost of equity - rises
WACC falls then rises
Cost of debt -eventually rises
Value of co - rises then falls
4
Q
M&m no tax 1958
A
Cost of equity - rises
WACC stays the same
Cost of debt - stays the same
Value of co - stays the same
5
Q
M&m with tax 1963
A
Cost of equity rises
WACC falls
Cost of debt stays the same
Value of co - increase
