From the course: Foundations of Treasury Management
Join today to access over 25,300 courses taught by industry experts.
Factors influencing optimal capital structure
From the course: Foundations of Treasury Management
Factors influencing optimal capital structure
- One of the key questions in corporate finance is whether you can impact the value of an asset, such as a house or an entire company, by strategically choosing the mix of borrowing and owner investment used to finance the purchase of that asset. This topical area is called capital structure. To talk about this, we need to do a little historical discussion. The first sophisticated analysis of this was done in 1958 by professors Modigliani and Miller - They concluded "No, it doesn't make any difference whether you borrow the money or whether the money is owner invested. The financing choice does not impact the value of the company, so don't worry about capital structure." - Now, to derive this result, professors Modigliani and Miller made some extreme assumptions. - In their mathematical model, they assume that there are no taxes, no bankruptcy costs, no differences in information among people, and no frictions that…
Practice while you learn with exercise files
Download the files the instructor uses to teach the course. Follow along and learn by watching, listening and practicing.
Download courses and learn on the go
Watch courses on your mobile device without an internet connection. Download courses using your iOS or Android LinkedIn Learning app.