Corporate Finance: Instructor\'s Manual Applied Corporate Finance

(Amelia) #1
Aswath Damodaran 288

Costs and Benefits of Debt


! Benefits of Debt


  • Tax Benefits

  • Adds discipline to management
    ! Costs of Debt

  • Bankruptcy Costs

  • Agency Costs

  • Loss of Future Flexibility


This summarizes the trade off that we make when we choose between using debt


and equity.

Free download pdf