Chapter 13 Capital Structure And Leverage

  • Diversification and Capital Structure

    Diversification strategy and capital structure of multinational corporations Imed Eddine Chkir a,1, Jean-Claude Cosset b,* Faculty of administration, Uni6ersity of Ottawa, 136 Jean-Jacques Lussier Street, Ottawa, Ont., Canada K1N 6N5 b Departement de finance et assurance, Faculte des sciences de l’administration, Uni6ersite La6al, ´ ´ ´ Quebec, P.Q., Canada G1K7P4 ´ Received 3 April 1999; accepted 22 October 1999 a Abstract This study examines the relationship between the capital structure of multinational corporations

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  • Impacts of Profitability and Financial Leverage on Firm’s Capital Structure

    Impacts of Profitability and Financial Leverage on Firm’s Capital Structure By [Your Name] [Instructor’s Name] [Institution’s Name] [Date] Declaration While conducting the proposed research work, I, being a hard-working, innovative and conscientious researcher, come up with the factual severity of consequences allied with an act of plagiarising content from others’ work. Moreover, I do comprehend the rules and regulations my university encompasses against submitting a plagiarised

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  • Capital Structure

    Pandey CAPITAL STRUCTURE AND MARKET POWER I. M. Pandey Indian Institute of Management Ahmedabad Vastrapur, Ahmedabad 380015 India E-mail: W. P. No. 2002-03-01 March 2002 i CapStrMktPower I M Pandey CAPITAL STRUCTURE AND MARKET POWER I M Pandey ABSTRACT This paper provides new insights on the way in which the capital structure and market power and capital structure and profitability are related. We predict and show that capital structure and market

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  • Capital Structure Decisions

    CAPITAL STRUCTURE DECISIONS Research Project Presented to MPSTME,NMIMS In Partial Fulfilment of the Requirements of 5 Years Integrated MBA (Tech) Program By Kritika Goel 334 Year of Graduation: 2013 ACKNOWLEDGEMENT This is not a mere formality, but a means to express my sincere gratitude to all who helped me and played an essential role throughout my endeavour, so that I could complete this research project in time and achieve success. I acknowledge from the bottom of my

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  • Chapter 13

    CHAPTER 13 Current Liabilities and Contingencies ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Concept of liabilities; definition and classification of current liabilities. Accounts and notes payable; dividends payable. Short-term obligations expected to be refinanced. Deposits and advance payments. Compensated absences. Collections for third parties. Contingent liabilities (General). Guaranties and warranties. Premiums and awards offered to customers. Self-insurance, litigation, claims

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  • Capital Structure

    FINA510-13A Financial Theory and Corporate Policy Group Assignment 1 Capital Structure Group 58 1. Overview of New Zealand Industry Selection We have chosen 12 different industries with in 21 listed companies belong to 21 NZX industry groups shows in Table 1 below. The three latters in brackets followed by each company name are their listed symbol in New Zealand Stock Exchange. Table 1 List of Selected Industries and Firms. 1) Consumer | 7) NZ Debt Market | Pumpkin Patch

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  • Capital Structure Recommendation

    Capital Structure Recommendation There are a number of capital structure options available to provide funding for a Canadian expansion. Capital structure strategy should have two main objectives: align with operating strategy and maximize total shareholder returns. Too much debt leverage can lead to credit default and insolvency. Capital financing using bonds has risks because some types of bonds may place responsibility on the company to provide dividends, which could impact shareholder earnings

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  • Capital Structure and Information Asymmetry

    This paper will discuss the choice of capital structure in markets where there is information asymmetry. Particular reference is made to how debt is used as a signalling tool along with a discussion on debt maturity structure. The pecking order theory is examined. Finally this paper reveals empirical evidence of capital structure. Arnold Musadziruma 210525268 Clint Kruger 209541568 Kemsley Grantham 209538112 i “Seminar 4- Capital structure and information asymmetry (2013)” Abstract This

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  • Capital Structure

    Assignment #2: Business Financing and the Capital Structure Marquis C. Saddler Professor Jason Powers FIN100 December 1, 2013 Business Financing and the Capital Structure Explain the process of financial planning used to estimate asset investment requirements for a corporation. Explain the concept of working capital management. Identify and briefly describe several financial instruments that are used as marketable securities to park excess cash. A corporation having a financial plan

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  • At&T Capital Structure Project

    AT&T is the 21st largest company in the world by market value, and the 13th largest non-oil company. As of 2013, it is also the 21st largest mobile telecom operator in the world, with over 107.9 million mobile customers. Capital Structure AT&T's capital structure is among the most conservative in the telecom industry, and management is committed to maintaining that position. The firm's net debt load currently totals 76.2 billion as of September 2013. Over a span of three years their net

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  • Aspeon Capital Structure Case

    related to the systematic risk of the firm’s assets. Financial risk is the equity risk that is due entirely to the firm’s chosen capital structure. As financial leverage, or the use of debt increases, so does financial risk and, hence, the overall risk of the equity. Business risk depends on a number of factors, including competition, liability exposure, and operating leverage. b.) In the total risk sense, one common measure of business and financial risk is the variability of ROE, also known as the

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  • Capital Structure

    UNDERSTANDING CAPITAL STRUCTURE As discussed in the previous section, a DCF requires a discount rate. The discount rate is a function of the risk inherent in any business and industry, the degree of uncertainty regarding the projected cash flows, and the assumed capital structure. In general, discount rates vary across different businesses and industries. The greater the uncertainty about the projected cash stream, the higher the appropriate discount rate and the lower the current value of the cash

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  • Apple Capital Structure

    Solutions to Problem Set II Question 1 RWJJ Chapter 16 / Question 8 8. a. The earnings per share are: EPS = $37,500/5,000 shares EPS = $7.50 So, the cash flow for the shareholder is: Cash flow = $7.50(100 shares) Cash flow = $750 b. To determine the cash flow to the shareholder, we need to determine the EPS of the firm under the proposed capital structure. The market value of the firm is: V = $65(5,000) V = $325,000 Under the proposed capital structure, the firm will raise new debt in the amount

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  • Capital Structure

    MP A R Munich Personal RePEc Archive Economic Factors Influencing Corporate Capital Structure in Three Asian Countries: Evidence from Japan, Malaysia and Pakistan Muhammad Mahmud and Gobind M. Herani and A.W. Rajar and Wahid Farooqi KASBIT, KABIT, Sindh University, Indus Institute of Higher Education 20. April 2009 Online at MPRA Paper No. 15003, posted 4. May 2009 07:34 UTC Indus Journal of Management & Social Sciences, 3(1):9-17 (Spring 2009)

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  • Capital Structure

    American Finance Association A Theory of Capital Structure Relevance Under Imperfect Information Author(s): Robert Heinkel Reviewed work(s): Source: The Journal of Finance, Vol. 37, No. 5 (Dec., 1982), pp. 1141-1150 Published by: Blackwell Publishing for the American Finance Association Stable URL: . Accessed: 19/05/2012 14:37 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .

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  • Determinants of a Company's Capital Structure

    the best financing mix or capital structure for his firm. Capital structure could have two effects. First, firms of the same risk class could possibly have higher cost of capital with higher leverage. Second, capital structure may affect the valuation of the firm, with more leveraged firms, being riskier, being valued lower than less leveraged firms. If we consider that the manager of a firm has the shareholders' wealth maximisation as his objective, then capital structure is an important decision

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  • Capital Structure

    finance with their article “The cost of capital, corporate finance and the theory of investment”. Before Modigliani’s and Miller’s article, literature on the topic mainly focused on descriptions of methods and institutions. Theoretical analysis was very rare (Pagano 2008). Under the assumption of perfect capital markets, the Modigliani-Miller Proposition I states that “the average cost of capital to any firm is completely independent of its capital structure and is equal the capitalization rate of

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  • The Capital Structure of Microsoft Corporation

    Southern New Hampshire University Investigative Report The Capital Structure of Microsoft Corporation Zhang Yue Capital Budgeting & Financing, Fin 630 David Fehr June 3rd, 2013 Abstract At the first part, we are going to introduce Microsoft Corp. and how it works. Then, we try to figure out the WACC of Microsoft based on the data like income statements, balance sheets, cash flow statements, and some data searched from Yahoo! And Google Finance. At last, we are going to analyze and

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  • Chapter 13

    emphasis on promotion in its marketing mix. What is the role of promotion in the marketing mix? What types of promotional tools are available to companies and what factors influence the choice of tool? How is the promotion plan created? The rest of the chapter answers these questions. Ethics in Marketing Pull Strategy for Prescription Drugs Puts Doctors in the Hot Seat During the diet-drug debacle, doctors wrote millions of prescriptions for the fen-phen drug combination for patients wanting to lose

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  • Capital Structures of Family Businesses

    compared to that of non-family businesses. Most research done in the field focused on corporate governance measures, family relationships, succession, and performance indicators of family owned businesses. This research article also deals with capital structure & performance of family businesses in India. Article 1: (Kim & Gao) Does Family involvement increase business performance Family involvement in business management attracts much scholarly attention in the field of family

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  • Chapter 14 Capital Structure Basic Concepts

    Chapter 14 1. The Modigliani-Miller Proposition I without taxes states:  *A. A firm cannot change the total value of its outstanding securities by changing its capital structure proportions. B. When new projects are added to the firm the firm value is the sum of the old value plus the new. C. Managers can make correct corporate decisions that will satisfy all shareholders if they select projects that maximize value. D. The determination of value must consider the timing and risk of the cash

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  • Capital Structure

    ............................................................................................... 13 SECURITY & PRIVACY .......................................................................... 13 LOCK-IN .................................................................................................. 13 ISOLATION FAILURE ............................................................................. 13 MANAGEMENT INTERFACE COMPROMISE ........................................ 14 INSECURE OR INCOMPLETE

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  • Capital Structure

    Lecture 13: Capital Structure Theory Exercises Question 1 Levered Inc. and Unlevered Inc. are identical in every respect except for capital structure. Both companies expect to earn $150 million in perpetuity, and both distribute all of their earnings as dividends. Levered’s perpetual debt has a market value of $300 million and the required return on its debt is 7%. Levered’s stock sells for $100 per share, and there are 5 million shares outstanding. Unlevered has 8 million shares outstanding worth

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  • Capital Structure

    Capital Structure Stewart C. Myers The Journal of Economic Perspectives, Vol. 15, No. 2. (Spring, 2001), pp. 81-102. Stable URL: The Journal of Economic Perspectives is currently published by American Economic Association. Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at JSTOR's Terms and Conditions of Use provides

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  • Capital Structure

    and Capital Structure of Privatized Firms in Europe ´ ´ MARIA JOSE ARCAS & PATRICIA BACHILLER Faculty of Economics and Business Administration, Department of Accounting and Finance, University of Zaragoza, Zaragoza, Spain ABSTRACT The objective of this paper is to analyze whether there are differences in performance between private firms and recently privatized firms in the European Union, as well as to determine whether ownership (state-owned versus private) and regulation affect capital structure

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  • Evaluation of Capital Structure

    Evaluation of capital structure 1.1Capital Structure: Basic Concepts The purpose of this chapter is to introduce the student to the foundations of capital structure concepts. The chapter first discusses capital structure decisions in an ideal world without taxes or transaction costs. This discussion leads to the famous Modigliani-Miller Propositions I and II that show that a firm's capital structure is a matter of indifference. The discussion next adds corporate taxes and the tax deductibility

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  • Capital Structure

    Science Vol. 2 No. 19 [Special Issue - October 2011] Perceived Relationship between Corporate Capital Structure and Firm Value in Nigeria Semiu Babatunde ADEYEMI Department of Accounting University of Lagos Lagos, Nigeria Collins Sankay OBOH Department of Accounting University of Lagos Lagos, Nigeria Abstract This study examined the empirical effects of corporate capital structure (financial leverage) on the market value of a selection of firms listed on the Nigerian Stock Exchange. Both primary

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  • Capital Structure

    to total capitalization ratio)? 4. Does the company have any preferred stock? 5. What is the capital structure of the company: short-term portion of long-term debt, long-term debt, preferred stock (if any), and market value of common stock issued and outstanding? 6. What is the company’s current actual beta? 7. What would the beta of this company be if it had no long-term debt in its capital structure? 8. What is the company’s current marginal tax rate? 9. What is the cost of debt before and

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  • Chapter 13

    Chapter 13 Questions 2. If you were an advertising manager for a magazine aimed at senior citizens, what advantages would you cite to potential advertisers? The first thing I would cite to advertisers is that magazines are great for target audiences. Also, magazines last longer than normal print advertisements. Many times you will find magazines that are several months old in doctors offices, waiting rooms, and even in your own home. I would try to sale the flexibility (pg 406) to the potential

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  • Chapter 13

    1) What I found interesting from this chapter was the section the pertained to the effects of divorce on children. According to the textbook (p.351) it states that almost half of all divorces occur within families that have children. It states that some people try to dismiss the concept that divorce has no effect on the children involved, but in fact, there are long-term social, emotional, and psychological effects. Some consequences of children products of divorce are on a micro-level, such as

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  • Determinants of Bank Capital Structure

    OF CAPITAL STRUCTURE Evidence from Commercial Banks in Ethiopia By K i b ro m M e h a ri F i s s e h a Reg.No.-CBE/PR0025/01 Research Project Submitted to the Department of Accounting and Finance, College of Business and Economics, Mekelle University, for the partial fulfillment of the degree of Master of Finance and Investment Under the Guidance of Aregawi Gebremichael (Ph.D. Candidate) Assistant Professor May, 2010 Mekelle, Ethiopia i THE DETERMINANTS OF CAPITAL STRUCTURE

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  • Capital Structure

    Capital Structure Capital Structure is the proportion of debt, preference and equity capitals in the total financing of the firm’s assets. The main objective of financial management is to maximize the value of the equity shares of the firm. Given this objective, the firm has to choose that financing mix/capital structure that results in maximizing the wealth of the equity shareholders. Such a capital structure is called as the optimum capital structure. At the optimum capital structure, the weighted

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  • Chapter 13

    CHAPTER THIRTEEN The Cash Flow Statement and Decisions Review Previous chapters examined the information provided by the income statement, balance sheet, and statement of changes in owners’ equity. Fits Where This Chapter In addition, a brief introduction to the cash flow statement was provided in Chapters 2 and 3. Where This Chapter Fits This chapter examines the cash flow statement in depth and focuses on how the information provided by this important statement is used for

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  • Mgec61 Note - Chapter 13

    course 1) Introduction – chapter 13 2) Interest rate parity (how exchange rate is determined by the flows of capital) and exchange rate overshooting – chapters 14 & 15 3) Purchasing power parity and the exchange rate in the long run (how exchange rate is determined by the flows of goods and the determinants of exchange rate in the long run) – chapter 16 4) The DD-AA model (the model that explains how exchange rate and output are determined in general equilibrium setting) – chapters 17 &18  Flexible exchange

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  • Capital Structure

    FINC 5000 LESSON NOTES – WEEK 7 CHAPTER 15 Capital Structure Introduction: Capital Structure Theory - Capital Structure refers to the proportion of debt and equity being used to finance a firm’s assets: Assets = Debt + Equity Capital Structure - In this lesson we will examine the notion that capital structure affects the value of the firm. That is, the value of the firm might change with the amount of debt that is present. -

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  • Capital Structure

    -------------------------------------- The impact of capital structure on profitability of listed construction companies on Hanoi Stock Exchange from 2008 to 2013 FALL 2014 Instructor Mr. Tran Viet Dung Group members Nguyen Thi Thanh Tam (FB00464) Nguyen Thi Viet Chinh (FB00405) Hoang My Linh (FB00073) Dang Thi Hong Hanh (FB00253) Nguyen Thi Kieu Trang (FB00078) Hanoi, December 2014 Table of Contents List of tables 3 List of figure 4 Abstract 5 Chapter 1: Introduction and Thesis Outline 6

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  • Capital Structure Pizza Palace

    The Capital Structure of Nicci’s Pizza Palace September 13, 2011 The Capital Structure of Nicci’s Pizza Palace A company is funded by debt, equity, or retained earnings. The mixture of debt and equity is the company’s capital structure. There are four factors that influence capital structure; business risk, tax position, financial flexibility, managers, growth rate, and market conditions. Management’s decisions concerning capital structure should be geared toward maximizing the intrinsic value

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  • Chapter 13

    Capter 2 CHAPTER 13 Post Exploitation South Texas College Advance Network Security CHAPTER 13 Contents Introduction ...................................................................................................................................................................3 I. Exploiting XP .........................................................................................................................................................4 II. Exploiting Ubuntu

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  • Capital Structure

    Profit & Loss, Balance Sheet and Cash flows are directly linked with Annual report to ensure data is authentic, “as reported” by the company. • Business Activity classification for all companies based on Products, Segment and Abstract. • 13 Different industry specific financial format presentations on Profit and loss, Balance sheet and cash flow. • Corporate actions – More than 100 events updated Such as Pledged Shares, QIP details, Insider trading, Offer for Sale (OFS), Merger & Demerger

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  • An Analysis of Capital Structure of Next

    ------------------------------------------------- An analysis of capital structure of NEXT Programme of Study: MSC INVESTMENT Module: International Treasury Management Tutor: Students ID Number: Date: 23/3/2016 Programme of Study: MSC INVESTMENT Module: International Treasury Management Tutor: Students ID Number: Date: 23/3/2016 Contents 1. Introduction 3 2. Capital structure 4 2.1. Theories 4 2.2. Types of capital 6 2.3. Sources of capital 7 2.4. Reasons of conducting

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  • Capital Structure Decisions: Extensions

    a. MM Proposition I states the relationship between leverage and firm value. Proposition I without taxes is V = EBIT/rsU. Since both EBIT and rsU are constant, firm value is also constant and capital structure is irrelevant. With corporate taxes, Proposition I becomes V = Vu + TD. Thus, firm value increases with leverage and the optimal capital structure is virtually all debt. b. MM Proposition II states the relationship between leverage and cost of equity. Without taxes, Proposition II is

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  • Managerial Economics - Find Out the Leverage Ratio If the Capital Structure Has Rs 4,00,000 Equity and Rs 1,60,0 Debt.

    Perfect Competition. 4. Cost Volume Profit Analysis. 5. What is Capital Rationing? Section – C (Marks – 50) Attempt any five questions – 1- Explain in detail the nature and scope of Managerial Economics. How Micro Economics differs from Managerial Economics? 2. What is Empirical Production Function? Explain the optimum combination of inputs with diagrams. 3. What is Cost of Capital? Explain its structure and role in inter- national competitiveness. 4. What is Elasticity

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  • Capital Review of Structure

    Empirical Capital Structure: A Review Christopher Parsons1 and Sheridan Titman2 1 2 University of North Carolina at Chapel Hill, USA, Chris University of Texas at Austin, USA, Abstract This survey provides a synthesis of the empirical capital structure literature. Our synthesis is divided into three parts. The first part examines the evidence that relates to the cross-sectional determinants of capital structure. This literature

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  • Capital Structure - Coke

    Capital structure refers to the way a corporation finances its assets through some combination of equity and debt. A firm's capital structure is the composition of structure of its liabilities. According to Modigliani-Miller theorem, in a perfect capital market (no transaction or bankruptcy costs; perfect information); firms and individuals can borrow at the same interest rate; no taxes; and investment decisions aren't affected by financing decisions. Modigliani and Miller made two findings under

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  • Chapter 15- Capital Structure Decisions

    ------------------------------------------------- Chapter 15 Capital Structure Decisions ------------------------------------------------- ANSWERS TO END-OF-CHAPTER QUESTIONS 15-1 a. Capital structure is the manner in which a firm’s assets are financed; that is, the right-hand side of the balance sheet. Capital structure is normally expressed as the percentage of each type of capital used by the firm--debt, preferred stock, and common equity. Business risk is the risk

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  • Capital Structure

    Modigliani and Miller's Capital-Structure Irrelevance Proposition Modigliani and Miller, two professors in the 1950s, studied capital-structure theory intensely. From their analysis, they developed the capital-structure irrelevance proposition. Essentially, they hypothesized that in perfect markets, it does not matter what capital structure a company uses to finance its operations.  The MM study is based on the following key assumptions: * No taxes * No transaction costs * No bankruptcy

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  • Capital Structure

    FINC 5000 LESSON NOTES – WEEK 7 CHAPTER 15 Capital Structure Introduction: Capital Structure Theory - Capital Structure refers to the proportion of debt and equity being used to finance a firm’s assets: Assets = Debt + Equity Capital Structure - In this lesson we will examine the notion that capital structure affects the value of the firm. That is, the value of the firm might change with the amount of debt that is present. -

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  • Capital Structure

    Capital structure Issues:        What is capital structure? Why is it important? What are the sources of capital available to a company? What is business risk and financial risk? What are the relative costs of debt and equity? What are the main theories of capital structure? Is there an optimal capital structure? 1 What is “Capital Structure”?  Definition The capital structure of a firm is the mix of different securities issued by the firm to finance its operations. Securities

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  • Chapter 13 Capital Structure and Leverage

    Chapter 13 Capital Structure and Leverage LEARNING OBJECTIVES After reading this chapter, students should be able to: • Explain why capital structure policy involves a trade-off between risk and return, and list the four primary factors that influence capital structure decisions. Distinguish between a firm’s business risk and its financial risk. Explain how operating leverage contributes to a firm’s business risk and conduct a breakeven analysis, complete with a breakeven chart. Define

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  • Capital Structure

    Capital Structure – Chapt. 16 in text Does Capital Structure affect firm value? MM Proposition I (No Taxes): The value of a levered firm is equal to the value of an unlevered firm. VL = VU. i.e., Financing Choices do not add value. Why? Because you can create homemade leverage if you wish. • Unlevered Firm vs. a Levered Firm with the same assets. Recapitalization of Trans Am Corporation. Debt issue of $4,000,000 at 10% to buy back equity. Alternatively, you may view them as

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