The Capital Structure Decision and Taxes, James Tompkins

This is the fourth lecture in the "Advanced Corporate Finance" series in which I begin to discuss the role that taxes play in the firm's capital structure decision. Do companies issue a lot of debt because interest payments shield them from corporate taxes? Is this a driving force that underlies their decision to have debt or are there other more important issues? In this lecture, I look at not only the implication of corporate taxes, but also personal taxes and their respective importance on the firm's capital structure decision.

[@MM-br1bh]

I was really struggling with these concepts until I came across your video. Your teaching style is very effective. Thanks for taking the time to break it all down!!!

[@understandingfinance]

+Michael McGee Thanks and you are welcome.

[@jennychapman7080]

Thank you for breaking down these topics in an easy to understand format - very helpful in my finance class.

[@understandingfinance]

You are so welcome. Delighted it is helpful. Good luck with your finance class.

[@YesJellyfish]

You seem so passionate about teaching, amazing! Very clear, perfectly paced and wholesome video. Thanks a lot!

[@understandingfinance]

+Nimfex Thankyou!

[@TILARFHT]

Thank you again James, I enjoy your intuitive teaching so much

[@understandingfinance]

Farshid Hoseini You are welcome.

[@zenapsgas]

Just started taking finance, your videos definitely deserves more views. I like your way of presenting, and your examples gives me a lot more confidence of the material.

[@understandingfinance]

That's great! Good luck.

[@saif3049]

Thank you so much professor for all these lectures! Your biggest fan from the London school of economics(and there are many of us)!

[@understandingfinance]

Thanks..:)

[@yonatantacza9746]

this class is excellent !!

[@asheikh4432]

that's a wonderful lecture on the capital structure, explained it so clearly and made it easy to understand. Thank you so much.regards

[@understandingfinance]

You're welcome.

[@ricpue]

Great lesson! thanks

[@sammuthu1]

Thanks for the great video! I am not clear about benefit of debt. If you take a loan, yes you pay less taxes, but you have to also pay interest. In your example around 8:00, with the loan, Net Income is $60. Without the loan, it would have been $120. So, is't debt costing more in that case?

[@ericzhou1788]

Extremely useful lecture!!! Thanks so much

[@understandingfinance]

You are very welcome.

[@MrFatah786]

excellent excellent

[@Clifffffffffford]

Thanks !

[@rahmaagustini9086]

thank you for helping understand about capital structure ?

[@understandingfinance]

+Rahma Agustini You are welcome. :)

[@michaelluke1618]

Hi Dr James,
Thank for another excellent video.
However, just one suggestion - perhaps, you may want to consider using an e-whiteboard or write directly on your lecture slides as you explain instead using your papers and trying to place close to the camera cause sometimes they were not very visible.
Anyway, your works are addictive! Congratulation.

[@understandingfinance]

Thank you for your kinds words and constructive suggestion. You are right about an e-whiteboard or similar method relative to my current low-tech approach and moving forward I will look into it. Thanks again and I am delighted you are enjoying the lectures.

[@MrYourownd]

Isn't the formula for pv tax shield: (D*tau*rd)/rf? Why do you assume rd=rf?

[@aamirrahman6299]

Hello sir .. nicely explained....I have a question ..do you think a PhD research can be done on taxes and capital structure?

[@understandingfinance]

Thanks Aamir... I would talk to your dissertation advisor if I were you. He/she needs to be on board for whatever your idea is. I would personally encourage you pick an area that interests you because you will be "living and breathing" it for a long time. Beyond that, for a Ph.D., you need to do something that has not been done before / advances the area. For example, a new data set used to test relevant and interesting hypotheses as it relates to your topic. So to answer your question, yes I do think it is possible to do Ph.D. research on taxes and capital structure.

[@aamirrahman6299]

@@understandingfinance thank you , may I have Ur Facebook or LinkedIn id so that I get connected to you?

[@udaymoka]

sir..could you teach about mergers and acquisition topic..............thanks in advance