Abstract: This chapter presents an analysis of the optimal capital structure using two examples: Harvard Business School and Damodaran. The optimal capital structure minimizes the value of the weighted average cost of capital and maximizes the value of the firm. The chapter analyzes the relationships between the goal of maximizing each share's price and the objective of achieving an optimal capital structure. The cash flows generated by the company decrease with the leverage. Damodaran offers a similar approach to that of the Harvard Business School but applies it to a real company and assumes a constant cash flow growth of 8.86%. It is proved that a company with a real production process should not invest in financial assets. The value of the real production process and the financial asset is larger when held separately.
Publication Year: 2002
Publication Date: 2002-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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Cited By Count: 1
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