Fin630 session4 discussion question 1 with 2 response

Aug 12th, 2016
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Week4 Financial Leverage and WACC Dq1 Some critics blame debt for financial crisis of 2008. Although this is probably not true, debt did play some role in it. Crisis did not stop what The Economist calls addiction to debt in its recent article (A senseless subsidy, The Economist, May 16, 2015) - balance sheets of corporations get more and more debt and little equity. Looking at the WACC formula suggests that more debt relative to equity might lower WACC. Is financial leverage "always" good or "always" bad? What does the Economist article say about debt being bad? Looking at different industries, please suggest which ones would be expected to have greatest and least leverage.

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Week4Financial Leverage and WACCDq1Some critics blame debt for financial crisis of 2008. Although this is probably not true, debt did play somerole in it. Crisis did not stop what The Economist calls addiction to debt in its recent article (A senselesssubsidy, The Economist, May 16, 2015) - balance sheets of corporations get more and more debt andlittle equity. Looking at the WACC formula suggests that more debt relative to equity might lowerWACC. Is financial leverage "always" good or "always" bad? What does the Economist article say aboutdebt being bad?Looking at different industri

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