Figure 172

Two Pie Models of Capital Structure

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

VI. Cost of Capital and Long-Term Financial Policy

17. Financial Leverage and Capital Structure Policy

© The McGraw-Hill Companies, 2002

PART SIX Cost of Capital and Long-Term Financial Policy

M&M Proposition II

The proposition that a firm's cost of equity capital is a positive linear function of the firm's capital structure.

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