Question

The manager of a firm should change the capital structure if and only if Blank______. Multiple choice question. the value of the debt exceeds the value of the equity the change will increase the value of the firm it benefits management the change will decrease the value of the firm

Answer 1

The manager of a firm should change the capital structure if and only if Bank increases the value of the firm.

Capital structure

• The capital structure alludes to the particular blend of obligation and value used to back an organization's resources and tasks.
• According to a corporate viewpoint, value addresses a more costly, long-lasting wellspring of capital with more prominent monetary adaptability.
• Obligation, then again, addresses a less expensive, limited to-development capital source that legitimately commits the organization to fixed, guaranteed cash outpourings with the need to renegotiate sometime not too far off at an obscure expense.
• An organization's capital structure is the consequence of such supporting choices that might be directed by capital construction strategies or targets set by the executives and the board.
• Capital structure is additionally impacted over the long haul by the organization's tasks, which could consume or produce cash, and by the board choices in regards to profits and offer buybacks.
• The capital design choice is critical to the firm, the ideal capital construction limits the company's general expense of capital and augments the worth of the firm.
• The utilization of obligation finances in capital construction builds the EPS as the interest on an obligation is charge deductible, which prompts an expansion in share cost.

Hence, if and only if Bank raises the firm's value, the manager of the company should alter the capital structure.

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