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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. 

 

Directions for Submitting the Final Project 

 

Compose your research paper in a MS Word® document using 6th edition APA format and citation style and save it as Username-GB550 Assignment 1-Unit#.doc (Example: TAllen- GB550 Assignment_1- Unit 5.doc). Submit your file by selecting the Unit 5: Assignment Dropbox.