Explain the costs and limits of debt financing.
Debt financing offers tax benefits. However, there are costs to using debt as part of the capital structure.
Discussion Question:
Explain the costs and limits of debt financing.
Do you agree or disagree with the following statement? “A firm’s stockholders will never want the firm to invest in projects with negative net present values.” Explain.
Firms sometimes use the threat of a bankruptcy filing to force creditors to renegotiate terms. Critics argue that in such cases the firm is using bankruptcy laws “as a sword rather than a shield.” Is this an ethical tactic?
