Chapter Outline The Capital Structure Question The Effect of Financial Leverage Capital Structure and the Cost of Equity Corporate Taxes and Capital Structure Bankruptcy Costs Optimal Capital Structure Observed Capital Structures A Quick Look at the Bankruptcy Process1 Chapter Outline n The Capital Structure Question n The Effect of Financial Leverage n Capital Structure and the Cost of Equity n Corporate Taxes and Capital Structure n Bankruptcy Costs n Optimal Capital Structure n Observed Capital Structures n A Quick Look at the Bankruptcy Process