Premium Essay

Crede

In: Business and Management

Submitted By Robehgene
Words 2554
Pages 11
Financial Management
Capital Structure

1

Capital Structure
This lecture will explore the determinants of the mix of debt and equity the firm uses to finance its operations. • We will first explore the situations under which capital structure is irrelevant to a firms operations. Examining these situations will allow us to explore how the following factors influence the mix of debt and equity a firm uses to finance its operations. • TAXES • RISK • FINANCIAL SLACK • ASSET CHARACTERISTICS • COSTS OF FINANCIAL DISTRESS.

Capital Structure - 1

2

The Capital Structure Question
MODIGLIANI – MILLER (MM): IRRELEVANCE OF CAPITAL STRUCTURE A. Firm Value and Capital Structure: • Modigliani-Miller (MM) Proposition I: The value of the firm is independent of the capital structure of the firm UNDER certain assumptions.
– 1st Arbitrage Proof in Finance: – Concept of Homemade Leverage.
Capital Structure - 2 3

Assumptions of MM:
COMPLETE AND PERFECT CAPITAL MARKETS Capital Structure Does Not Matter IF: • No Taxes - Assumption Relaxed. • No Bankruptcy Costs • No Costs of Enforcing Debt Contracts or issuing securities. • Investment Opportunities are Given • Homogeneous Expectations about the Investment Opportunities of Firms

Capital Structure - 3

4

MM Proposition II:
The cost of equity capital for a levered firm = • The constant overall cost of capital + a risk premium. re = ra + (1 − tc )(ra − rd ) D E

•Where the risk premium due to debt = the spread between the overall cost of capital and the cost of debt multiplied by the firm's debt equity ratio. and: re = required rate of return for equity. rd = required rate of return for debt. ra (or ρ) = required rate of return of a company with 100% equity (the same as the asset required rate of return). & tC is the corporate tax rate.
Capital Structure - 4 5

The CAPM and MM Proposition II
• Both…...

Similar Documents

Premium Essay

Importance of Information and Communication Technologies (Icts) in Making a Heathy Information Society: a Case Study of Ethiope East Local Government Area of Delta State, Nigeria

...Library Philosophy and Practice 2008 ISSN 1522-0222 Importance of Information and Communication Technologies (ICTs) in Making a Heathy Information Society: A Case Study of Ethiope East Local Government Area of Delta State, Nigeria Monday Obaidjevwe Ogbomo Esoswo Francisca Ogbomo Department of Library and Information Science Delta State University Abraka, Nigeria Introduction There is widespread research interest in information and communication technologies (ICTs). According to Crede & Mansell (1998), ICTs are crucially important for sustainable development in developing countries. Thioune (2003) notes that for the past two decades most developed countries have witnessed significant changes that can be traced to ICTs. These multi-dimensional changes have been observed in almost all aspects of life: economics, education, communication, and travel. In a technologydriven society, getting information quickly is important for both sender and receiver. ICTs have made it possible to quickly find and distribute information. Thoiune (2003) indicates that many initiatives have taken at the international level to support Africa's efforts to develop a communication infrastructure and. These efforts are designed to enable African countries, including Nigeria, to find faster ways to achieve durable and sustainable development. Helmut (1998), cited by Akpore (1999), states that of the technological changes that have influenced our lives in recent years, information technology (IT)......

Words: 3240 - Pages: 13

Free Essay

Factors Affecting Students Studies

...economic success, however. It is the key to achieving our full potential. Human beings are uniquely adapted to learn and we have the ability to do so throughout our lives.Learning has the power to transform us. Specifically, we can become more successful:at home and with our families, at work and at large in our local community. (Campaign for Learning, UK, 2001) Learning is very important. As human beings we are expected to learn to be able to cope with the new generation. To be able to learn effectively, one must have a good study habits. Study habits are routines, including, but not restricted to, frequency of studying sessions, review of material, self-testing, rehearsal of learned material, and studying in a conducive environment. (Crede and Kuncel, 2008) Study habits are a persons routine to acquire more information or review a certain topic. Study habits is one of the method in which a person learns and enhance his or her learning. Having a good study habits is essent ial especially to students, because it is their tool to be able to learn and acquire information. (Salami and Aremu, 2006) are of the opinion that through the......

Words: 288 - Pages: 2

Premium Essay

My Cousin Vinny

...depiction of some of the procedures and processes. The movie taps different elements of the criminal justice system as a whole. There are countless individuals who do not realize the formalities, which go into actually being convicted for a crime. My cousin Vinny explore different aspects of these pretrial stages, criminal trials and the major actors in the process of the court hearing (Crede, 2012). There are a number of similarities as well as differences amongst what the movie has portrayed and the actual process of the criminal justice procedure which will be explored in this paper. The movie revolves around two New Yorker friends, Stan and Bill, who are traveling through Rural Alabama. These two friends make a stop on their way to buy some necessities from a shop. Immediately after they leave, another car, similar to theirs, pulls over. Two men get out of the car and kill the attendant of the store and runs away. Meanwhile, the two friends, Stan, and Bill, soon realize that they have accidently taken a tuna fish without paying. They soon see a police car on their tail and are asked to pull over (Crede, 2012). They think that they are being arrested for stealing the tuna fish. They are not told for what crime they are being arrested by the police. The police arrest them as the suspects of killing the shop attendant. They contact a cousin, Vincent Gambini, who is a newly turned lawyer to defend themselves. Vinny has never been into an actual court proceeding and this is......

Words: 1191 - Pages: 5

Premium Essay

Transformational Leadership

...emotional intelligence, intuitively one may conclude that emotional intelligence can therefore be linked to transformational leaders. Unfortunately, despite the vast body of research on the subject, a conclusive relationship between emotional intelligence and transformational leadership has not been sufficiently established to warrant submitting to the premise without further examination of the case for and against such a relationship. For all those that lend their support to the existence of such a relationship (Barling, Slater & Kelloway, 2000; Gardner & Stough, 2002; Goleman 1998a; Goleman 1998b) almost an equal number either denies or shows questionable support for a relationship between the two (Brown, Bryant & Reilly, 2005; Harms & Credé, 2010; Küpers & Weibler, 2005; Lindenbaum & Cartwright, 2010) In addition to those who sit on either side of the fence, there are those who propose that whilst a relationship between the two does exist, when linked with narcissistic leadership the relationship is not always a desirable one (Buono, 2001; Maccoby, 2000; Rosenthal & Pittinsky, 2006). It is interesting to note, that despite the differing views on the matter similar research methods were typically adopted by those examining the question. By measuring the commonly accepted components of emotional intelligence models and the commonly accepted components of transformational leadership models – or some minor variation of this approach, researchers have been able to determine......

Words: 2991 - Pages: 12

Premium Essay

Spelling Deficiency

...the sounds in spoken English. Read's study involved 20 preschool children who were able to identify and name the letters of the alphabet and relate the names of the sounds of words. His study revealed that even at an early age children are able to detect the phonetic characteristics of words that English 5 spelling represents. Furthermore, read noticed that even though young children misspelled most of the words they attempted, they misspelled the words in the same way. According to Masterson and Crede, the development of spelling skills is not random, but rather evolves in stages. These stages have been described by researchers such as Ehri (1987), Gentry (1982), Bourassa & Trieman (2001), and Henderson (1990). The developmental sequences described by Ehri and Gentry consist of three stages. Henderson's system is slightly more elaborate and includes five stages of spelling, progressing from nonsymbolic scribbles to correct spellings. According to Masterson and Crede (1999), children pass through the following stages in acquiring conventional spelling: 1. Preliterate stage: Writing consists of scribbles, drawings, and some letters. During this stage, children develop early concepts such as differentiation between writing and pictures, directionality (i.e. writing from right-to-left, top-to-bottom), and basic phonemic awareness. 2. Letter-name stage: Phonemic awareness skills improve and children employ the alphabetic principle, representing each sound in......

Words: 1830 - Pages: 8

Free Essay

Study Habit

...Nneji L (2002). Study habits of Nigerian university students, in Quality Conversations, Proceedings of the 25th HERDSA Annual Conference, Perth, Western Australia, 7-10 July 2002: pp 490. Available @ http://www.herdsa.org.au/wpcontent/ uploads/conference/2002/papers/Nneji.pdf Azikiwe U (1998). Study approaches of university students. World Council of Curriculum and Instruction (WCCI), Region II Forum 2:106 – 114. Crede M, Kuncel NR (2008). Study habits, skills, and attitudes: the third pillar supporting collegiate academic performance. Perspectives on Psychol. Sci. 3 (6):425-453. Patel BV, (1976). Study habits inventory. In: Second Handbook of Psychology and Social Instruments, Ed. Pestonjee, D.M., Concept Publishing Company, New Delhi. Onuoha U.D. and Subair M.O. (2013). Study habits of undergraduate students in selected federal universities in South-west Nigeria. Educ. Res. 4(10):717-721 Ozsoy G, Memis A, Temur T (2009). Metacognition, study habits and attitudes. Available @ http://www.iejee.com/2_1_2009/ozsoy.pdf Ogoemeka OH (2013). Study habits Skills Components as Predictors of Academic Performance among Teacher Trainees in Nigeria. Int. J. Educ. Res. 1 (1). Also available @http://ijsse.com/ijer/sites/default/files/papers/2013/v1i1/Paper-4.pdf Eliot L, Foster S, Stinson M (2002). Student study habits using notes from a speech to-text support service, Exceptional Children, 69(1):25-40 Maryland Community College (2002). Developing......

Words: 301 - Pages: 2

Premium Essay

Study Habits

...Education_Sector Assessment Project, 2011). What explains these performance discrepancies? Multiple reports indicate that academic success cannot be predicted by a single variable. It is dependent upon many factors; both cognitive and non-cognitive. Numerous studies have been carried out which focused on cognitive factors as predictors of academic success. Recently, there has been a growing interest on the non-cognitive factors. A number of researchers have examined the role of non-cognitive variables such as study skills (Fazal, S. et.al, 2012; Awang, G & Sinnadurai, S.K., 2011; Demir et. al, 2012; Hassanbeigi et.al, 2011), study motivation (Tella, A., 2007; Nonis and Hudson, 2008), study behavior (Yang Yang, 2011; Otto, 1978), study habits (Crede and Kuncel, 2008; Nuthana & Yenagi, 2009; Nouhi et.al, 2008; Bashir et. al, 2012; Boehler, 2001; Kurshid, 2012; Mutsotso et. al, 2010), and attitudes (Sarwar et.al, 2010 and Yu, 2011) on academic achievement. Some argued that these factors have strong relationship with academic performance of students while others concluded that it was the combination of the different factors that could explain students’ academic performance. - See more at: http://www.open-science-repository.com/study-habits-and-attitudes-the-road-to-academic-success.html#sthash.ZhPpOsFs.dpuf...

Words: 431 - Pages: 2

Premium Essay

Factors Affecting the Academic Performance of Working Students in Hotel & Restaurant Management

...practical internships. The likelihood of working while in school for college students has been increasing particularly as the cost of education has also been rising. Noni’s and Hudson (2006) Academic performance is measured by the standing of rates of grades of student in every subject. Having a high level of performance on the academic area of a student suggest its competency and high level of confidence on its certain field. Students have their own attitude towards learning and achieving a high level of academic performance. The development of their enthusiasm towards succeeding in their own field varies. In order for a student to succeed he needs to be armed with strategies and techniques that will supplement his desire to reach his goals. Crede and Kuncel (2008) One way is to have an efficient and adaptive study habit. This phenomenon can be linked to multi factors that affect their study habit. Such factors can be found in their environment, these includes the type of house they live in; the people around them and the level of support they give; the student and his family’s daily routines; the availability of resources for studying; and also his family’s economic status.  Since working students appears to have negative effects on student enrollment rates and perhaps also on academic performance, if possible, it may be prudent to find other ways of financing college so they can complete their degrees, maintain their academic performance levels, and thereby reap the......

Words: 2084 - Pages: 9

Premium Essay

Research Proposal

...personal consumption of caffeine as well as their study habits when preparing for a test/exam. It was hypothesized that the more caffeine a student consumes while studying, the more accurately his or her study habits would be labelled as 'unhealthy', as determined by the researchers. Unhealthy study habits were operationally defined as low scores on amount of time per study session, time(in days) when preparation began, and amount of information the participants believed they had retained. High scores on anxiety level were included in 'unhealthy' study habits. A Pearson correlation indicated no relationship between amount of caffeine consumed while studying and the individual's effectiveness of studying and preparation. Marcus Credé and Nathan R. Kuncel (2008) in their research at the University of Albany said that Study habit, skill, and attitude inventories and constructs were found to rival standardized tests and previous grades as predictors of academic performance, yielding substantial incremental validity in predicting academic performance. The meta-analysis examined the construct validity and predictive validity of 10 study skill constructs for college students. They found that study skill inventories and constructs are largely independent of both high school grades and scores on standardized admissions tests but moderately related to various personality constructs; these results were inconsistent with previous theories. Study motivation and study......

Words: 6859 - Pages: 28

Premium Essay

Research About Academic Performance

...be of use in similar research projects. Keywords Motivated Strategies for Learning Questionnaire (MSLQ), motivation, self-regulation, factor analysis The Motivated Strategies for Learning Questionnaire (MSLQ) is a popular measurement instrument in educational psychology research. It has been used in literally hundreds of educational research projects to assess student motivation and strategy use (Duncan & McKeachie, 2005) and has gained recent, renewed attention in measurement literature (Cho & Summers, 2012; Credé & Phillips, 2011; Dunn, Lo, Mulvenon, & Sutcliffe, 2012). The creators of the instrument proposed a hypothesized structure of the subscales in their initial work (Pintrich, Smith, Garcia, & McKeachie, 1991) and subsequently examined empirical evidence for the factorial validity of two major sections of the scale during the creation of the instrument. In addition, others have examined combinations of items for specific subscales (e.g., Credé & Phillips, 2011) or conducted meta-analyses of existing studies to examine the entire instrument (Dunn et al., 2012). However, few studies have examined all of the subscales in a single administration of the MSLQ, save for those conducted by the creators of the scale (Pintrich & DeGroot, 1990; Pintrich et al., 1991, Pintrich, Smith, Garcia, & McKeachie, 1993) and a validity study conducted on a translated version of the scale (Nirmala & Sachs, 1999). The scarcity of measurement work that examines the......

Words: 8556 - Pages: 35

Premium Essay

Motivation Towards Study

...consideration, in securing data, in presenting these data for class criticism, and in raising questions. Classroom study is now eliminating much of the former home study, especially in the elementary and junior high schools. The purpose of this method is to train students, under the guidance of the teacher, in habits of study. Student’s academic performance occupies a vital role in education as well as in the learning process. It is a key criterion in judging one’s total potential and capacities. It is used to pass judgment on the quality of education offered by academic institutions. In fact, it is still the most topical debate in many learning institutions that caused great concern to educators and researchers. In a more recent meta-analysis, Crede and Kuncel (2008) found that non-cognitive factors like study habit, skill and study motivation, among other attitudinal constructs, accounted for incremental variance in academic performance beyond standardized tests and previous grades. Moreover, a literature review by Nagaraju (2004) pointed out that, for good academic success, good study habits and attitudes are important. Hence, it is imperative and desirable that a probe into the pattern of study habits and attitudes of students be made.  Numerous studies have been carried out which focused on cognitive factors as predictors of academic success. Recently, there has been a growing interest on the non-cognitive factors. A number of researchers have examined the role of......

Words: 5763 - Pages: 24

Free Essay

Thomas Kilmann

...propriile interese). Ele pot fi clasificate în cinci categorii: 1.Confruntare (reprimare,victorie/înfrângere) 2.Colaborare (victorie/victorie) 3.Compromis 4.Evitare (abandon) 5.Acomodare (convertirea coflictului în şansă) 1.Confruntare (reprimare, forţare, victorie/înfrângere) - rechinul Rechinul încearcă să îşi domine adversarii prin a-i face să accepte soluţia lui în cazul unui conflict. Scopurile sale personale sunt sunt dominante în raport cu relaţiile interpersonale, pe care le sacrifică foarte uşor. Caută să îşi atingă ţelurile cu orice preţ. Nu îl interesează nevoile celorlalţi. Nu îl interesează dacă ceilalţi îl plac sau îl acceptă. Rechinul crede că un conflict se câştigă atunci când o parte învinge iar cealaltă este înfrântă. El vrea să fie câştigătorul cu orice preţ. “Victoria”, îi dă rechinului un sentiment de mândrie şi de realizare personală. Înfrângerea îi dă un sentiment de slăbiciune, neadaptare şi ratare. Încearcă să câştige prin atac, copleşire sau intimidare. 2. Colaborare (victorie/victorie) - bufniţa Bufniţa preţuieşte în egală măsură scopurile personale cât şi relaţiile cu ceilalţi. Ea vede conflictele ca pe probleme ce trebuie rezolvate şi caută soluţii care să satisfacă atât interesele personale cât şi cele ale celorlalţi. Bufniţa vede conflictul ca pe o metodă de îmbunătăţire a relaţiilor prin reducarea tensiunii dintre două persoane sau grupuri.......

Words: 1329 - Pages: 6

Free Essay

Canzone

... Sol forse quelli della mala forse la pubblicità Lam Fa hanno ucciso l'Uomo Ragno Do Sol non si sa neanche il perché Lam Fa Do avrà fatto qualche sgarro a qualche industria di caffè Lam Fa Alla centrale della polizia Sol Re il commissario dice che volete che sia Lam Fa quel che è successo non ci fermerà Sol Do Sol Lam Sol il crimine non vin - ce - rà Do Sol ma nelle strade c'è il panico ormai Rem Lam Sol nessuno esce di casa nessuno vuole guai Do Sol ed agli appelli alla calma in TV Rem Lam adesso chi ci crede più Sol Lam hanno ucciso l'Uomo Ragno Do Sol chi sia stato non si sa Lam Fa Do Sol forse quelli della mala forse la pubblicità Lam Fa hanno ucciso l'Uomo Ragno Do Sol non si sa neanche il perché Lam Fa Do avrà fatto qualche sgarro a qualche industria di caffè Lam Fa giù nelle strade si vedono gang Sol Re di ragionieri in doppio petto pieni di stress Lam Fa se non ti vendo mi venderai tu Sol Do Sol Lam Sol per 100 lire o poco più Do Sol le facce di vogue sono miti per noi Rem Lam Sol attori troppo belli......

Words: 389 - Pages: 2

Free Essay

Calitatile Unui Manager

...putea fi interpretat ca o cicalire sau sa fie transmis un mesaj de lider cicalitor. Insa cel mai bun mod de a corecta o greseala este de a da un sfat catre mai bine si a verifica ceea ce a putut cauza eroarea in mod initial. C. Managerul ca lider Caracteristicile care fac un lider sa fie lider de sine statator pot fi insa altele 1. Empatie Cei mai buni manageri reusesc sa comunice si sa ii inteleaga pe ceilalti, stiu sa se faca placuti si au angajati cu incredere in fortele proprii. Un manager empatic se poarta frumos cu angajatii sai, le acorda increderea sa, le recunoaste meritele si le este alaturi atunci cand intampina probleme. 2. Integritate morala Un bun manager face ceea ce trebuie sa faca, nu ceea ce crede ca este bine sa faca. O asemenea atitudine inseamna, uneori, sa-si recunoasca greselile si sa faca tot ceea ce ii sta in putinta pentru a le repara. 3. Modestie Chiar daca are o cultura impresionanta, un manager bun nu se va lauda. Ba mai mult, va stii intotdeauna sa isi recunoasca slabiciunile, atunci cand este cazul. Nu de putine ori, un manager care este in stare sa recunoasca faptul ca nu este atotstiutor, va fi considerat o persoana inteligenta. In plus, un adevarat lider poate comunica cu angajatii sai si le va cere parerea si sfatul atunci cand are nelamuriri. 4. Intuitie Chiar daca este considerata o trasatura feminina, intuitia poate fi exersata si stapanita de catre toata lumea, mai ales atunci......

Words: 1469 - Pages: 6

Premium Essay

Hotel and Restaurant Keme

...internships. The likelihood of working while in school for college students has been increasing particularly as the cost of education has also been rising. Noni’s and Hudson (2006) Academic performance is measured by the standing of rates of grades of student in every subject. Having a high level of performance on the academic area of a student suggest its competency and high level of confidence on its certain field. Students have their own attitude towards learning and achieving a high level of academic performance. The development of their enthusiasm towards succeeding in their own field varies. In order for a student to succeed he needs to be armed with strategies and techniques that will supplement his desire to reach his goals. Crede and Kuncel (2008) One way is to have an efficient and adaptive study habit. This phenomenon can be linked to multi factors that affect their study habit. Such factors can be found in their environment, these includes the type of house they live in; the people around them and the level of support they give; the student and his family’s daily routines; the availability of resources for studying; and also his family’s economic status. Since working students appears to have negative effects on student enrollment rates and perhaps also on academic performance, if possible, it may be prudent to find other ways of financing college so they can complete their degrees, maintain their academic performance levels, and thereby reap the long-term......

Words: 321 - Pages: 2