How would issuing more debt affect the WACC

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Reference no: EM133015259

The Case of Adam co

Required:

1-Do you agree with Adam to start his business in the form of a corporation? Discuss how Abdulrahman could have convinced Adam to change his decision and move to a partnership rather than a PLC.

2-Do you agree with the mission chosen for Adam Co? Analyze whether the firm responsibility should be solely towards its own shareholders?

3-Clarify what is meant by corporate social responsibility (CSR) and assess whether you believe that Adam Plc is committed to/violating CSR.

4-Making use of the different dividend theories that you covered, link the opinions of Adam, Saeed, and Mohammed to the theories that are the base of these opinions.

5-As an IBM graduate, you were consulted on the dividend policy that the firm should adopt. Explain what would be the dividend policy that you would recommend.

6- As an IBM graduate, advice the firm which project it should undertake (make use of NPV and payback period). Justify your decision (with the help of calculations) and critically discuss the limitations of each method used. (All calculations need to be displayed clearly in the appendix).

7-Making use of the information provided, calculate:

7-1-the cost of equity
7-2-the cost of preferred shares
7-3-the cost of debt
7-4-the cost of loan
7-5-the WACC
7-6-Critically discuss the limitations of the WACC you calculated.

8-Calaculte, using the adjusted net asset value method, the price that the firm should pay for the target company.

9- Comment on the capital structure of the firm. Given the current capital structure:

1.-Do you agree that the tirm should not issue shares to the public and only rely on debt? What theory of capital structure is the base of this argument? Explain your answer.

9-2-Critically assess how would issuing more debt affect the WACC?

10-Assess the risk that Adam Co might face if the firm decided to make an investment in Turkey.

Learning outcome 1: Critically examine the theories and concepts related to shareholder value creation, financial planning, implementation and management in uncertain environments.

Learning outcome 2: Apply appropriate concepts and reasoning to inderstand strate:gic and financial data to generate appp roriate credible decisions.

Learning outcome 3: Critically examine methods to the appraisal of financial statements and how these form the basis of making decisions in financial management and capital investment.

Attachment:- Case of Adam.rar

Reference no: EM133015259

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