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Essay / Research Paper Abstract
This 10 page paper considers the implications of capital structure for a company. The paper looks at how financial theory, including that of Modigliani and Miller, offer any guidance and what practical considerations impact upon deciding the optimum mix of debt and equity. The bibliography cites 10 sources.
Page Count:
10 pages (~225 words per page)
File: TS14_TEcapitals.rtf
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Unformatted sample text from the term paper:
a business also needs capital, which may come from a variety of sources, however these can be defined as the level of equity, which is money that is invested with
the hope of a return and debt, which is borrowed funds on which interest is usually payable and is an amount that will need to be repaid at some point.
The set up of a business should also take into consideration of the way in which the underlying capital structure should be made up. It is argued by some
that capital structure may have an impact on the market value of a company or that the structure will impact on the cost of capital or the ability to gain
investors or lenders. To consider this we need to look at how financial theory may help is this determination of the capital structure and the implications of any choice.
It should be remembered that at the beginning investment equity is likely to be private and only becoming public after the business has shown a profit and there is an
initial public offering (IPO). The higher the value of a company the greater the level of income that can be gained form an IPO. However the company also need to
be able to operate and gain the position where an IPO can be made. The first aspect we will need to remember is the way in which shares are
priced. These are as a direct result of supply and demand. The higher the demand for shares the higher the price will go, but when there are more shares being
sold than buyers want to buy, the price will fall. This will then change the market value of the company. The demand for shares will have many influences, people, or
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