Page 358 - FM Integrated WorkBook STUDENT 2018-19
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Chapter 18





                           The traditional view of capital structure





               4.1 Graphical representation of the traditional view


                             The traditional view is based on real world observation.


                                                                                  k e



                     Cost of
                    capital %                                                      WACC




                                                                                    k d






                                                         X                     Gearing


                            $




                                                                                        Market value
                                                                                        of debt and
                                                                                           equity







                                                         X                     Gearing












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