7.16 CORPORATE FINANCE IMPLICATIONS: OVERVIEW
The capital asset pricing model provides an important foundation for addressing corporate finance problems. We discuss two applications.
The first is the firm's financing decision. The question of interest here is the way different claims, i.e., debt and equity, issued against the total risky cash flows from a firm affect the total value of the firm. This question is addressed in topic 7.17, Capital Structure Implications
The second is the appropriate discount rate to use to discount uncertain cash flows from a project. An introduction to this capital budgeting issue is provided in topic 7.19, Risk-Adjusted Discount Rates.
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