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Should the company incur debt or not

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Reference no: EM132892955

Question 1: This is a CAPITAL STRUCTURE challenge - should the company incur debt or not? Why or why not?

Question 2: If so, how much debt should it incur?

Question 3: How does one convince the CEO that it is in the company's best interests to take on some debt?

This case was selected to:

  • To create an awareness of alternative capital structures on financial performance, and how to value the benefits created by debt finance.
  • To illustrate capital structure theory and how to select a target debt-to-capital ratio.
  • To consider the effect of corporate culture and managerial philosophy on the capital structure decisions, and how to convince management to change to a more optimal level of debt finance.
  • To question the value of textbook discussions on capital structure, and the benefits of debt finance, when a successful company like Hill Country Snack Foods has consciously chosen to avoid the use of debt finance.

 

Reference no: EM132892955

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