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MBM018 Corporate Finance - Chapter 7 (No Optimal Capital Structure (The…
MBM018 Corporate Finance - Chapter 7
The choices: Types of Financing
Continuum of debt ad Equity
Equity
Debt
Hybrid Securities
Financing Behaviour
Internal vs External Financing
Growth, Risk, Financing
Startup
Expansion
High Growth
Mature Growth
Decline
How firms have actually raised funds
The Trade-Off of Debt
Benefits of Debt
Debt has a tax advantage
Debt may make managers more disciplined
Costs of Debt
Debt Increases Expected Bankruptcy Costs
Debt creates Agency Costs
Balance Sheet Trade Off
Process of raising Capital
Private firm expansion: Raising from Private equity
1) Provoke equity investor interest
2) Valuation and return assessment
3) Structuring the deal
4) Post deal Management
5) Exit
From Private to Publicly traded firm: The IPO
Staying Private vs Going public
Steps in an IPO
The costs of going Public
Choices of Public Traded Firm
General Subscriptions
Underwriting Agreement
Pricing of Issue
Private Placements
Rights Offerings
No Optimal Capital Structure
The Irrelevance of Debt in a Tax Free World
Irrelevance of Debt with Taxes
Consequences of Debt Irrelevance
Contribution of Miller-Modigliani Theorem
There is an Optimal Capital Structure
Case for Optimal Capital Structure
Empirical Evidence
How Firms choose Capital Structure
Financing Mix and Firms Lifecycle
Financing Mix based on compareable firms
Following a Financing Hierarchy