Dear Sir
I agree with the principle that debt reduces the cost of capital in terms of WACC. In todays world a lot of companies are sitting on cash piles due to different market factors. If a company is returning for example 20%, has a cash pile and debt is cheap and even cheaper with tax do they still borrow on assets????
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M & M practical aspect
8y ago#1There is no point in borrowing if they do not need the money for anything. The money should either be invested in new assets/new companies, or returned to shareholders either as dividend or by buying back shares. (Buying back shares and cancelling them would in itself increase the gearing)
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