Explain briefly how WACC is related to the level of leverage (debt/equity ratio) of a firm. What are the key differences between the main capital structure theories?
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Explain briefly how WACC is related to the level of leverage (debt/equity ratio) of a firm. What are the key differences between the main capital structure theories?
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- How WACC is related to the level of leverage (debt/equity ratio) of a firm. What are the key differences between the main capital structure theories?Describe how the following factors affect external capitalrequirements: (1) payout ratio, (2) capital intensity, (3) profitmargin.Explain why the required rate of return on a firm's assets must be equal to the weighted average cost of capital associated with its liabilities and equity. Explain using the concepts from the course.
- Based on the Liquidity ratio, which ratio determine stability, earning power and capital? Explain the formula and its impact & importance. Choose one only.What is financial leverage? Explain the concept in relation to financial ratios.What weights should be used when you calculatethe WACC? Discuss the choice between book value and market value weights, and the role of the“target” capital structure for a firm whose actualcapital structure is far removed from the target.
- How do free cash flows and the weighted averagecost of capital interact to determine a firm’s value?When placed in the context of looking at a company's capital structure, are there different forumulas you can use to find Weighted Average Cost of Capital and does the company being levered or unlevered make a difference?Question 3:- What are the two different formulas used to Calculate the degree of financial leverage (DFL)? What is common-size financial statement analysis? What are Market Value Ratios?