When this is reported in the wall street journal

Assignment Help Financial Management

Reference no: EM131900796

Explain what capital structure theory (or theories) best describes the following situations.

A CEO decides to borrow $50,000 in new debt, and the share prices rise dramatically. He then decides to sell half of his own personal shares, and when this is reported in the Wall Street Journal, the share prices drop dramatically in value.

The corporate tax rate rises from 35% to 45%, and the XYZ Corporation decides to issue more debt. A year later, bankruptcy laws are changed to become much stricter and costlier. XYZ then decides to pay back half of its debt.

A CEO named Joe Bigwig is known for living large with very expensive cars and a huge mansion. Joe is seeking a large loan from a bank to finance some new projects for his corporation. However, the bank becomes concerned when they find out that he recently used company funds to buy a brand-new company jet and also schedules numerous business trips to Hawaii and stays in five-star hotels. The bank tells Joe he will receive the loan only if he agrees to scale back on his personal expenses and not give himself or any other executives a raise until the loan is paid back.

Reference no: EM131900796

Questions Cloud

Religious observance of death : Choose the cultural practice or religious observance of death that most closely relates to your personal perspective.

Home loan-the flores family pay for the down payment : Home Loan-How much did The Flores family pay for the down payment? What is the loan amount?

Define way to run department in health care industry : What would be the most ideal way to run a department in the health care industry as a new department manager.

Contribute to low quality throughout the supply chain : Examine the problems and causes that may contribute to low quality throughout the supply chain.

When this is reported in the wall street journal : when this is reported in the Wall Street Journal, the share prices drop dramatically in value.

Working in teams of female and male member : Working in teams of female and male member, develop a list of behaviors that could be classified as quid pro quo harassment or hostile environment.

How does laneshas temperament affect the situation : How does Lanesha's temperament affect the situation? What responsibilities do health care providers have in this situation?

Shares of common stock outstanding : Filer Manufacturing has 8.9 million shares of common stock outstanding. The current share price is $59, and the book value per share is $4.

Risky or considered at-risk plans : Incentive plans can be "risky" or considered at-risk plans. There are two basic types or categories. Define and describe each.

User Account

All Pages