MGFC10H3 Lecture Notes - Lecture 2: Operating Leverage, Capital Structure, Net Present Value
Document Summary
Can we increase replacing its debt with equity the value of the firm by. The modigliani miller model m m analysis proposition i. Ii no taxes with corporate taxes personal taxes. Operating leverage increases as fixed costs rise and variable costs fall. Operating leverage magnifies the effect of business risk by. The degree of operating leverage is given o. Financial leverage fixed costs of financing is the sensitivity of afirm"s. Bs ba t hit a mc. The pie theory determined by the business risk and increases when bls increases and no tan. T b h rft b nm rt. Managers should pick debtequity ratio that makes the pie as big as possible. Invest npv 70 project make the pie bigger. Financial leverage eps and roe an all equity firm that is considering going. Some of the originalshareholders want to cash out. Perpetual cash flow ps pa a 1313 1 1 tc insane perpetualcashflow.
