Purpose – The purpose of this paper is to instruct upper level business students on the intricacies of the debt‐equity choice with the emphasis on showing the interrelation of this choice with the plowback‐payout choice. Design/methodology/approach – The paper is designed around a...

The traditional approach to capital expenditure analysis is based on the neoclassical economic paradigm. According to this paradigm, managers are assumed to strive for profit maximization in an effort to maximize the wealth of the firm's stockholders. In their pursuit of this objective, the...