Firm Value and the Debt-Equity Choice
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Authors
Hull, Robert M.
Issue Date
2004-08-1
Type
Working paper
Language
en_US
Keywords
Corporate finance , Corporate debt , Debt-to-Equity Ratio
Alternative Title
Abstract
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.
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Citation
Publisher
Washburn University. School of Business