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anonymous
 5 years ago
I am trying to calculate the optimal capital structure of a firm. The company i am using has zero EBIT value,how can i go about it.
anonymous
 5 years ago
I am trying to calculate the optimal capital structure of a firm. The company i am using has zero EBIT value,how can i go about it.

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anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0It can be chosen according to industry average but you must care for a size of predicted EBITs. The predicted values of EBIT couldn't be lower than interest expenses on debt.

anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0Tara, If you have zero operating income (EBIT), why would you want to borrow money in the first place. Your optimal debt ratio is zero.

anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0Aswath, I see your point and agree. To get funding, the firm (not Tara) should issue equity, by diluting the current owner's share of the pie. However the pie (postmoney) will likely become larger, else no one will be ready to fund.

anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0I got it.The optimal debt ratio is zero because there is no tax benefit from borrowing money, if you do not have a positive operating income.
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