Corporate Finance Spring 2025 - Session 18: Finishing up with Cost of Capital Optimization

In this quiz-shortened class, we started by tying up loose ends on the cost of capital approach, starting with why moving to the optimal changes the value of a business (hint: it is all in the tax code) and then looking at how sensitive the optimal debt ratio is to changes in operating income or rating constraints. We also looked at enhancements to the approach, where we incorporated indirect bankruptcy costs in the analysis. Slides: https://nyu.box.com/s/kw5jw5h1leu72muzlqjdt0079qo2rwvg Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session18test.pdf Post class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/postclass/session18soln.pdf