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Capital Structure and Cost of Capital
Define Capital Structure.
Combination of debt and equity used by a company to finance operations and growth.
What is Leverage or Gearing?
Proportion of debt capital in the total capital structure.
Why do bankers need to master Capital Structure and WACC?
Essential for credit appraisal, term-loan decisions, leverage assessment, and project finance.
Net Income Approach: What happens to WACC as debt proportion rises?
WACC falls and firm value increases; optimal structure theoretically 100% debt.
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