A company with low gearing is one that is mainly being funded or financed by share capital (equity) and reserves‚ whilst the one with a high gearing is mainly funded by loan capital. Now the question to address is which of the two (equity and debt) is cheaper to the company? The answer is that cost of debt is cheaper than cost of equity. This is because debt is less risky than equity and the tax advantage of debt over equity as discussed below: Risk: debt is less risky than equity because: • the
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Asian Journal of Finance & Accounting ISSN 1946-052X 2012‚ Vol. 4‚ No. 1 Capital Structure and Firm Performance in the Financial Sector: Evidence from Australia Vedran Skopljak School of Economics and Finance‚ La Trobe University Kingsbury Drive‚ Bundoora‚ Vic 3086‚ Australia Tel: 61-3-9479-1111 E-mail: vedran.skopljak@latrobe.edu.au Robin H. Luo (Corresponding author) Department of Finance‚ Wuhan University Luojia Hill‚ Wuhan 430072‚ China Tel: 86-27-6875-2740 E-mail: robin.h.luo@gmail.com
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30017 Corporate Finance Hannes Wagner The included PDF files are examples of case study write-ups made by students of the 30017 Corporate Finance course in 2012-2013. The underlying case was “Hutchison Whampoa Limited: The Capital Structure Decision”. The write-ups were evaluated as “excellent” and the students have agreed for their work to be distributed. All rights to their work remain with them. The instructions that students received were the following: “Your assignment is to provide a written
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Application of Capital Structure‚ Costs of Capital for Multiple Division firms Case Analysis: Pioneer Petroleum Corporation (PPC).1 Submitted by: Joseph Donato N. Pangilinan‚ FICD Date Presented: April 12‚ 2012 Introduction: This landmark case seeks to break the risk-reward trade off involved in calculating Capital Cost. The object of the solution must be to minimize project risks while maximizing project opportunities available. We want a rate and a rating system that does not unnecessarily
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Goodyear Report Since the early days of tire İndustry Goodyear Rubber&Tire Comanpy had been known as ‘’The Gorilla’’ for its dominance of the world tire industry.By 1991 They operated total of 84 plants which 41 in Us and 43 in 25 other countries with more than 2000 distribution outlets worldwide.They had 105.000 employees and ranked 3rd in the world wide sales of new tires. From 1900’s till 1970’s there were 5 big players in U.S tire industry.These companies were Goodyear‚Firestone‚Uniroyal
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Goodyear Tire Company and the Unionized Workforce HRM. /531 10/15/2012 Patrice Collier Goodyear Tire Company and the Unionized Workforce The Goodyear Tire and Rubber Company was founded the year of 1898 in the city of Akron‚ Ohio by a man named Frank Seiberling. The company was named after Charles Goodyear whom was responsible for the development of vulcanized rubber. Goodyear began with only thirteen workers but quickly emerged as a leader in the production of rubber items‚ and by 1926 had
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The Wm. Wrigley Jr. Company: capital structure‚ valuation‚ and cost of capital Teaching Note Synopsis In June 2002‚ a managing director of an active-investor hedge fund was considering the possible gains from increasing the debt capitalization of the Wm. Wrigley Jr. Company. Wrigley had been conservatively financed and at the date of the case‚ carried no debt. The tasks for the student are to: Estimate the potential change in value from relevering Wrigley using adjusted present value analysis
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Capital Structure‚ Profitability and Market Structure: Evidence from Textile Industries in Bangladesh. Introduction In corporate finance‚ the academic contribution of Modigliani and Miller (1958‚ 1963) about capital structure irrelevance and the tax shield advantage paved the way for the development of alternative theories and a series of empirical research initiatives on capital structure. The alternative theories include the trade-off theory‚ the pecking order/asymmetric information theory
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Ledbetter v. Goodyear Tire & Rubber Co.‚ Inc. United States Court of Appeals for the Eleventh Circuit‚ 2007 550 U.S. 618 (2007) Alito‚ Justice This is an employment discrimination case that was held by the Supreme Court of the United States. District Court found in favor of the Plaintiff awarding back pay and damages. Goodyear Appealed. The issue argued in the Supreme Court claimed all damages void before Sept. 1997 due to statute of limitations placed on discriminatory claims. The court
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Capital Structure Decisions: Which Factors Are Reliably Important? Murray Z. Frank and Vidhan K. Goyal∗ This paper examines the relative importance of many factors in the capital structure decisions of publicly traded American firms from 1950 to 2003. The most reliable factors for explaining market leverage are: median industry leverage (+ effect on leverage)‚ market-to-book assets ratio (−)‚ tangibility (+)‚ profits (−)‚ log of assets (+)‚ and expected inflation (+). In addition‚ we find
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