6. Please describe how changes in capital structure affect the value of the firm in a...

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Finance

6. Please describe how changes in capital structure affect thevalue of the firm in a world with taxes and including the possiblecosts of financial distress. Is there an optimal capital structurefor a firm? Please discuss. Electric utilities have an average 60%debt/total capitalization ratio whereas software firms have debtratios close to zero. Why? Please explain the dividend policy thatyou would advise for a tech company to adopt that has very highbusiness risk. How do you financially evaluate an acquisition?

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a Capital Structure refers to the combination of debt and equity funds applied in the firm There are various theories on capital structure which are classified into two schools of thought Traditional and Modern While the traditional school of thought believes that there is no impact of the cost of See Answer

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