The model determines the optimal capital structure (debt to asset ratio) for a firm given the market conditions and a schedule of the risk of debt and financial distress cost as a function of the firm’s leverage (debt to asset ratio).

• The model uses cost associated with financial distress and tax-deductibility of interest payments to estimate the firm’s Value
• The model implements Modigliani-Miller theorem to establish the relationship between market value of firm and its debt in capital structure
• The model calculates optimal debt level for the firm using 5 methods: Debt Schedule, Stepwise, Piecewise Linear, Best Fir Curve and Best Fit Segment and also visualizes Beta vs Asset/Debt ratio and Financial Distress VS Asset/Debt ratio

Financial Analytics: Capital structure theory, Modigliani-Miller theoremSpecifically: Income statement, leverage effect of debt, tax effect of debt (interest tax shield), financial distress cost