Given the importance of capital structure and its effect on the value, profitability and the performance of economic unit, it is important to determine the optimal capital structure
In particular, we share the Board's and management's view that creating two independent companies will enable each to establish an optimal capital structure
, pursue an expanded range of strategic initiatives, and reduce the public market discount that we believe affects Babcock & Wilcox in its current form.
The absence of an optimal capital structure
for a company, as well as the way that it can be determined, has been one of the most controversial topics in the finance literature since Modigliani and Miller (1958) stated their proposition about capital structure irrelevance in company value.
The transaction proceeds will enable the company to tap business opportunities in addition to those contemplated in the 2013-2015 Business Plan, while preserving a solid and optimal capital structure
Once the assumption of perfect capital markets is relaxed and real-world market imperfections are allowed to play a role in firm-financing decisions, then optimal capital structure
The optimal capital structure
is also the ratios set that leads to maximization of the general value of the profit unit.
Assuming that the absolute priority rule prevails and that liquidation is immediate upon default, we determine the firm's interior optimal priority structure along with its optimal capital structure
Optimal Capital Structure
under Corporate and Personal Taxation, Journal of Financial Economics 8: 3-29.
Therefore, they argue that that an optimal capital structure
can only attained if the tax protection benefits provided an increase in debt level is equal to the bankruptcy costs.
The decision on royalty and the success of the rights issues together with the signing of the vendor financing agreements, whilst fundamental in achieving its optimal capital structure
, have strengthened the options available to the company when considering its loan repayment of Dh3 billion due in June 2011 and its future needs for development and value creation to shareholders," the company said in a statement.
For example, if a company changes the nature or structure of its assets by investing in projects of greater risk than its current risk, and/or if external changes and trends in markets alter the business risk of the company, then the optimal capital structure
According to the lines of research in the sixties, a renovation of capital structure postulates the existence of an optimal capital structure
to the problem.