Firm Value and the Debt-Equity Choice
Author
Hull, Robert M.
Publisher
Washburn University. School of BusinessSponsor
Kaw Valley BankDate
August 2004Metadata
Show full item recordAbstract
This paper offers gain to leverage formulations showing how changes in equity and debt discount rates influence firm value. Applications of these formulations illustrate the impact on firm value with risk-free debt and only corporate taxes, with risky debt and only corporate taxes, and with risky debt and both corporate and personal taxes. To the extent changes in discount rates can be adequately estimate, this paper provides financial managers with practical formulations that can be used when they make their debt-equity choices.