Optimal Captial Structure By Walter Zelhofer
Channel: Walter Zelhofer
Date: 2019-09-13

In this video, I demonstrate how the optimal capital structure is the one that maximizes the value of the firm and minimizes the firm's  weighted average cost of capital (WACC).

I  extend the Miller-Modigliani model, and illustrate, within the adjusted present value (APV) framework originally pioneered by Stewart Myers, how to unlever and relever the equity beta that is consistent with my  model. 

Potential issues: the discount rate used in the financial distress costs. Assuming that free cash flows are independent of capital structure. 

Please let me know your thoughts in the comments below.