Application to Financial Policy
The nature of the contracts that
define the firm will affect the cost of debt, and, therefore, optimal financial
policy.
|
Firm Characteristic |
Impact on Leverage |
|
Growth options |
? |
|
Credence goods |
? |
|
Product warranties |
? |
|
Future product support |
? |
|
Supplier financing |
? |
|
Closely held firm |
? |
|
Regulation |
? |
|
Non-debt tax shield substitutes |
? |
|
Marginal corporate tax rate |
? |
|
Marginal personal tax rate |
? |