What is the optimal D/V ratio that minimizes the WACC with and without financial distress costs? Explain...

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Finance

What is the optimal D/V ratio that minimizes the WACC withand without financial distress costs?
Explain why the cost of debt and the cost of equity increase asdebt is added to the capital structure?
Explain why our method of increasing the cost of debt isunrealistic and what could you do instead?

Answer & Explanation Solved by verified expert

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1What is the optimal DV ratio that minimizes the WACC with and without financial distress costs The optimal debt value ratio or capital structure is estimated by calculating the mix of debt and equity that minimizes the WACC while maximizing its market value The lower the cost of capital the greater the present value of the firm future cash flow The objectives of every firm is to value maximization of the equity shareholder Every company will have its own optimal capital structure mix to maximize the value of the firm which will vary depends on the economic social and political situation of the world The optimal See Answer

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What is the optimal D/V ratio that minimizes the WACC withand without financial distress costs?Explain why the cost of debt and the cost of equity increase asdebt is added to the capital structure?Explain why our method of increasing the cost of debt isunrealistic and what could you do instead?

What is the optimal D/V ratio that minimizes the WACC with and without financial distress costs? Explain...

80.2K

Verified Solution

Question

Finance

What is the optimal D/V ratio that minimizes the WACC withand without financial distress costs?
Explain why the cost of debt and the cost of equity increase asdebt is added to the capital structure?
Explain why our method of increasing the cost of debt isunrealistic and what could you do instead?

Answer & Explanation Solved by verified expert

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