Solved: Why a firms value can be higher with leverage, Finance Basics

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Why a firms value can be higher with leverage

Please assist with the given problems.

Question 1. A firm's capital structure represents their view on leverage. With corporate taxes, discuss why a firm's value can be higher with leverage even though its earnings are lower.

Question 2. Suppose Google would like to attract more long term investors. What dividend policies should it consider? How do you think this would reflect in the value of the company?

Question 3. Discuss the approach to estimating the value of investment.

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Finance Basics: Why a firms value can be higher with leverage

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