Business
Business, 16.10.2021 18:20, serenityarts123

o alleviate Free cash flow problem, an entrepreneur could choose to following two work intensity: a) work 40 hours a week and produces $600,000 EBIT a year; b) work 70 hours a week and produces $850,000 EBIT a year; He could expand his business by raising more capital publicly. He could sell stocks publicly ( he is not going to buy more of the new issued stocks) or borrowing money resulting in a 50/50 debt/equity strucure. Generally speaking, which capital structure choice would motivate him work harder ( 70 hours instead of 40 hours a week)

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