Session 20: Optimal Financing Mix IV - Wrapping up the Cost of Capital Approach

[@jmv2848]

Great lecture! Thanks so much.

[@batatambor]

Is it a good approach to consider for a private company the same rating table for debt used for publicly trade companies? Since it's a small business, don't the banks charge a bigger spread and hence a bigger cost of debt?

[@shyi1242]

I think you are right... The cost of debt seems to only be a approximate for the bookstore and may not be that precise in this scenario.

[@parthadlakha1641]

what do we do in the case of an extremely small firm, let's say a general store in India/Africa. can they borrow money based upon these principles alone?

[@shivkuma100]

Professor, When a company wants to invest in new growth initiatives distinct from the traditional business mix, does the mix of equity investors (conservative vs aggressive) and debt-to-equity ratio matter? Has the financing mix hampered companies like GM to respond to new entrants like Tesla ? Or is this all a myth and what matters is the "DNA" of the company (which would preordain it to a declining status once mature)?

[@ankitdebnath4247]

Hi sir . Can you please show one illustration of the computation of enterprise value in say debt ratio of 50% once the indirect cost is factored in and there has been a fall in operating income