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Flashcards in Financing And Capital Structure Deck (7)
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1

Unlevered firm

Capital only Equity

2

Levered firm

Debt and Equity in its capital

3

Modiglioni Miller 1

Financing doesnt matter, WACC is constant

4

WACC in MM1

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

5

Beta in MM1

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

6

Modiglioni Miller 2

With taxes, Debt is not tax deductible

7

WACC in MM2

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


Tc = Tax