Wacc

Debt-equity ratio

M&M Proposition I with taxes implies that a firm's WACC decreases as the firm relies more heavily on debt financing:

M&M Proposition II with taxes implies that a firm's cost of equity Re, rises as the firm relies more heavily on debt financing: RE = RU + (RU - RD) X (D/E) X (1 - TC)

0 0

Post a comment