This note explores the interaction between the use of leverage and firm value, and gives a brief outlook on the use of debt. It also introduces the concepts of financial and operating leverage. In addition, it covers the impact of the use of leverage in the presence of taxes, corporate taxes only, and the personal and corporate income tax.

This note explores the interaction between the use of leverage and firm value, and gives a brief outlook on the use of debt. It also introduces the concepts of financial and operating leverage. In addition, it covers the impact of the use of leverage in the presence of taxes, corporate taxes only, and the personal and corporate income tax.
This is a Darden case study.
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Robert M. Conroy
Source: Darden School of Business
15 pages.
Release Date: 29 March 1991. Prod #: UV0455-PDF-ENG
Capital structure and corporate value HBR case solution