Reference no: EM132214914
Assignment
Select a publicly held company and analyze its capital-structure, applying the theories and principles found in Chapter 15 of the text.
The structure of your research paper should include:
A preview of capital structure issues
Business and financial risks related to capital-structure
Modigliani and Miller's [MM] capital-structure theory
Criticisms of the MM model and assumptions
Capital-structure evidence and implications
Estimating the firm's optimal capital-structure
A firm's optimal capital-structure is that mix of debt and equity that maximizes the stock price. At any point in time, management has a specific target capital structure in mind, presumably the optimal one, though this target may change over time.
For example, financial management may choose a 50% equity financing [stock] and 50% debt [bond] financing.
Several factors influence a firm's capital structure, including:
Business risk
Tax position
The need for financial flexibility
Managerial conservativeness
Growth opportunities
Business risk is the riskiness inherent in the firm's operations if it uses no debt.
This report is intended to be a capital-structure analysis of your selected public company.
Your paper is intended to be an executive summary of your analysis, and is limited to a minimum of 5-7 pages of text, excluding the title page, table of contents, graphs, charts, tables, etc.