Financing And Capital Structure Flashcards by Mathis Bertho | Brainscape

Q

Unlevered firm

A

Capital only Equity

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Q

Levered firm

A

Debt and Equity in its capital

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Q

Modiglioni Miller 1

A

Financing doesnt matter, WACC is constant

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Q

WACC in MM1

A

rA = WACC = E/(E+D) x rE + D/(E+D) x rD

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Q

Beta in MM1

A

B(A)= (D/D+E) x B(D)+ (E/E+D) x B(E)

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Q

Modiglioni Miller 2

A

With taxes, Debt is not tax deductible

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Q

WACC in MM2

A

rA = WACC = (E/E+D) rE + (D/E+D) rD (1-Tc)

Tc = Tax

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