Unit 5: Corporate Capital Structure, Cost of Capital, and Taxes
Does it matter whether a company's assets are being financed with 50% from a bank loan and 50% from investors' money? Does that form of capital structure, where 50% of assets comes from debt and 50% from equity, influence how a company succeeds in business? This unit addresses these questions by focusing on the theory of capital structure. Specifically, Unit 5 explains the concept of capital structure and introduces you to the most common formula used when comparing a company's return to the cost of capital: The weighted average cost of capital (WACC). Also, Unit 5 exposes the concept of how tax policy affects a company's true cost of capital.
Completing this unit should take you approximately 2 hours.
5.1: Capital Structure Finance Theory
5.2: Cost of Capital and Capital Structure: WACC
Unit 5 Assessment