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"The search for Optimal Capital Structure" and "Still Searching for Optimal Capital Structure".
Member rating: No Rating | Words: | Submitted: Mon Mar 01 2004
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Student Number: 00054178 Tutor: Mel Williams Tutor Group: Group 4 (Thursday) Critically discuss, in not more than 1500 words (and not less than 1200 words), the contributions which the following articles make to the capital structure debate "The search for Optimal Capital Structure" and "Still Searching for Optimal Capital Structure" (Steward Myers, Stern & Chew, 3rd Ed) The search of optimal capital structure, Stewart C. Myers stated that it is impossible of doing it and nobody has found the formula for it. He also argues that 'there is no magic in leverage'. It, however, has progress. Optimum capital structure is a balance of combination of debt and equity ever since Modigliant and Miller's (MM's) showed in 1958 that capital structure is irrelevant. According to this, firms can only increase shareholders wealth by making good investment which is implicitly supported by Brealey and Myers's Fourth law "You can make a lot of money by smart investment decisions than...
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