Optimum Leverage Ratio

Definition:

The borrowing level that maximizes the value of the firm. The cost of capital to the firm is minimized at that same level.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Measurement error

Errors in measuring an explanatory variable in a regression, which leads to biases in estimated parameters.

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