Model of Optimal Capital Structure Sheridan Titman McCombs School of Business The University of Texas at Austin e-mail: titman@mail.utexas.edu Sergey Tsyplakov Moore School of Business The University of South Carolina‚ Columbia‚ SC This paper also can be downloaded without charge from the Social Science Research Network Electronic Paper Collection: http://ssrn.com/abstract/332042 A Dynamic Model of Optimal Capital Structure∗ Sheridan Titman McCombs School of Business Department of Finance
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CHAPTER 16 FINANCIAL LEVERAGE AND CAPITAL STRUCTURE POLICY Answers to Concepts Review and Critical Thinking Questions 1. Business risk is the equity risk arising from the nature of the firm’s operating activity‚ and is directly 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 financing‚ increases‚ so does financial risk and‚ hence‚ the overall
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Major Considerations in Capital Structure Planning There are three major considerations in capital structure planning‚ i.e. risk‚ cost of capital and control‚ which help the finance manager in determining the proportion in which he can raise funds from various sources. Although‚ three factors‚ i.e. risk‚ cost and control determines the capital structure of a particular business undertaking at a given point of time. The finance manager attempts to design the Capital Structure in such a manner that
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Business Structure AdviceFIN/571Business Structure AdviceDear John Owen‚ My name is _____________‚ I will be your consultant and provide brief answers for each of your questions. Here is a list of useful tips for starting a business: First‚ you need to be clear about why you want to start a business. Determine the type of business and business structure you want to start (sole proprietorship‚ partnership‚ corporation‚ or (LLC) Limited Liability Company). Create a business plan that covers what
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Finance Working capital management in heavy engineering firms — A case study Dr. D. Mukhopadhyay An investigation into the effectiveness of working capital management of an organization with particular reference to its short term liquidity and solvency and impact on commercial operations of the organization. I ntroduction : The importance of working capital in any industry needs no special emphasis. Working capital is considered to be life-giving force to an economic entity. Management
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KIBRIA Dept. of Business Administration Southeast University Capital structure‚ the mixture of a firm ’s debt and equity‚ is important because it costs company money to borrow. Capital structure also matters because of the different tax implications of debt vs. equity and the impact of corporate taxes on a firm ’s profitability. Firms must be prudent in their borrowing activities to avoid excessive risk and the possibility of financial distress or even bankruptcy. A firm ’s debt-to-equity
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We have received a request to submit a business proposal for your online examination to be conducted next year for post graduation courses. We‚ Excellent Consultancy‚ are a leading consultancy firm in managing and organising events. We have successfully managed an online competition between different branches of Amity University‚ Noida. We have a team who are experts at negotiating with educational institutes for use of their premises. We have a business proposal for your online examination programme
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Organisational structures Most businesses are organised into structures because having a structure enables them to meet their purposes and aims and it also means that each employee will be divided into the job they specialise in which would mean an increase in production and an increase in sales for the company‚ this also means each employee is clear on what they have to do. An organisational structure is also established so that there are no conflicts in opinions about what decision to make between
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Business Structure Advice Adriana Tovar FIN/571 December 15‚ 2014 Professor David Gobeli Dear John Owner‚ In response to your request for business structure advice‚ I believe you will find the following information extremely helpful to lead you to your decision. First‚ you must know which your business structure options are‚ these include: sole proprietorship‚ partnership and corporation. A partnership could be general or limited and a corporation could be a general or a subchapter
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Pfizer Inc.’S Cost of Capital and Capital structure - Xiaoyue Shi The costs of capital and capital structures for Pfizer Inc. and its two competitors Merck & Co. Inc. and Johnson & Johnson in the pharmaceutical industry are analyzed in this memo. When calculating the cost of common stock for the three companies‚ three different approaches including Capital Asset Pricing Model (CAPM)‚ Discounted Cash Flow (DCF) and the bond yield plus risk premium are applied (Appendix A). For CAPM approach
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