Learn About Firm Value under Different Capital Structures
If you are studying finance, you surely would have heard of terms like firm value and capital structure. Often, you might as well have homework on topics like these. You might also require some sort of help with that homework. This is where myhomeworkhelp.com comes to your rescue. We provide firm value under different capital structures homework help along with help on other topics of finance. With our expert guidance, you will be able to complete your homework properly and on time.
What is firm value?
First and foremost, you would want to know what firm value actually is. Also known as enterprise value, firm value is basically a measure of the total value of a company. Often, it is used as a rather comprehensive alternative to equity market capitalization. A company’s market capitalization is just the product of its share price and the number of outstanding shares of the company.
This basic understanding is what you will definitely be provided when you hire our firm value under different capital structures homework help. You can consider the firm value to be the theoretical takeover price if the company was to be bought. In case of a buyout like this, the acquirer would usually have to take on the debt of the company, but would also have to pocket its cash for itself. There are many ways in which firm value and market capitalization differ.
Calculation of firm value
Your homework or assignment might also require you to calculate the firm value of a company. Worry not, our firm value under different capital structures assignment help is there for you! The calculation of firm value is done adding the market capitalization with debt, preferred shares, and debt, and subtracting cash equivalents and total cash. The preferred equity and minority interest are often effectively zero. However, that doesn’t necessarily have to be the case.
What is Capital structure?
The way in which the overall growth and operations of a firm are finance with the use of different fund sources is called capital structure. Debt comes in the form of long-term notes payable or bond issues, whereas equity is classified as retained earnings, preferred stock or common stock. Short-term debt like working capital requirements may also be considered as a part of capital structure.
Modigliani-Miller theorem
When you take our firm value under different capital structures homework help, the Modigliani-Miller theorem is a crucial thing you will come across. Proposed by Franco Modigliani and Merton Miller in 1958, this theorem forms basis for modern thing on the capital structure. However, it is usually considered something purely theoretical because several important factors are disregarded by it, such as fluctuations and other such uncertain situations. According to the theorem, the capital structure is irrelevant to firm value in a perfect market.
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