How to value a company. How to evaluate investment decisions. What’s the optimal way to finance those investments—through debt or equity? Corporate Finance studies all these questions.
When a company is in financial distress it hires outside professionals, such as tax and accounting experts with experience selling distressed assets. Investment bankers may also assist with financial restructuring. These are direct costs of financial distress. Aside from the…
Financing through debt is cheaper than through equity. This means more debt lowers the total cost of capital of a company, increasing its value. On top of that, increasing debt reduces the amount of corporate taxes a company has to…
Free cash flow (FCF) is the cash left over after a company pays the expenses that: Earnings are a company’s after-tax profits. Also known as the net income, or the bottom line. What’s the difference? Earnings vs. Cash Are earnings…
In this post, we’ll look at what happens to WACC as debt increases. We’ll start off by defining WACC, and understanding how it works. Then, we’ll describe the effect of financing strategies on the cost of capital. Financing strategies are…