JOURNAL OF FINANCE • VOL. LIII‚ NO. 4 • AUGUST 1998 Agency Costs‚ Risk Management‚ and Capital Structure HAYNE E. LELAND* ABSTRACT The joint determination of capital structure and investment risk is examined. Optimal capital structure ref lects both the tax advantages of debt less default costs ~Modigliani and Miller ~1958‚ 1963!!‚ and the agency costs resulting from asset substitution ~Jensen and Meckling ~1976!!. Agency costs restrict leverage and debt maturity and increase yield spreads
Premium Capital structure Corporate finance Debt
barely contribute to anything that will help the care of poor people that cannot help themselves. These under developed nations are faced with many infections‚ viruses and malnutrition and hardly anyone is doing anything. In Tracy Kidder’s Mountains Beyond Mountains‚ Paul Farmer spent and dedicated most of his life being a doctor in poor and corrupt countries. These people did not get the proper medical care they deserved because they were deprived of money and most of the hospitals in these poor countries
Premium Developing country Medicine Health care
Saving One Life at a Time In the book‚ Mountains Beyond Mountains by Tracy Kidder‚ Paul Farmer made and continues to make a profound difference in the world. He was extremely successful because of the help he received from people who surrounded him. Partners In Health (PIH)‚ Farmer’s organization‚ gives healthcare to people who cannot afford it and treatment to those with tuberculosis and AIDS. Although he was a founding advocate to the success of Partners In Health‚ Farmer would not have accomplished
Premium Mountains Beyond Mountains Paul Farmer Tuberculosis
Financial Decision Analysis~Marriott Corporation Case Study Executive Summary – Q5 – Hurdle Rate Analysis Hurdle rates‚ the weighted cost of capital that projected cash flows must exceed for initiatives to be considered‚ vary within Marriott Corporations due to their unique industry risk levels and capital structures. They use this number to determine which projects to accept‚ to adjust the rate at which the firm grows and as a measure for compensation within each business area‚ and as incentive
Premium Weighted average cost of capital Finance
The advancement of modern technology is making people’s life more comfortable and at the same time less human. To those who enjoy the benefits of technology‚ there is no better time to be alive than now‚ but to others life has been increasingly complex and stressful. The issue is whether such new technological machines as computers and the Internet would be our servants forever or eventually could become our masters. All kinds of inventions made possible by technology are designed to be the slaves
Free Technology Science Prehistory
CASE STUDIES IN FINACE CASE STUDY 3: ESTIMATING THE COST OF CAPITAL QUESTION 1: a)b)c) The Capital Assets Price Model (CAPM) is used to describe the relationship between risk and expected return and is often used to estimate a cost of equity (Investopedia‚ 2009). The cost of equity(COE) of the discount rate is: R = Rf + β*(E - Rf) (1) Rf = Risk free rate of return‚ usually U.S. treasury bonds β = Beta for a company E = Expected return of the market
Premium Weighted average cost of capital Boeing Commercial Airplanes Rate of return
case “Marriott Corporation: The cost of capital” 1) Are the four components of Marriott’s financial strategy consistent with its growth objective? In my opinion‚ the four components of Marriott’s financial strategy are consistent with its growth objective. As we find in the case‚ the four components of Marriott’s financial strategy: Manage rather than own hotel assets‚ Invest in projects that increase shareholder value‚ Optimize the use of debt in the capital structure‚ and Repurchase undervalued
Premium Marketing Hotel Hotels
Case Analysis of Nike‚ Inc.: Cost of Capital Apparently‚ the issue of Nike’s case is to control and check the calculation cost of capital done by Joanna Cohen who is the assistant of a portfolio manager at NorthPoint Group. But I am willing to tell you that it can be a complex case in which we can doubt about sensitivity analysis done by Kimi Ford (portfolio manager) because her assumptions such as Revenue Growth Rate‚ COGS / Sales‚ S &A / Sales‚ Current Assets / Sales‚ and Current Liability
Premium Finance Stock Weighted average cost of capital
Nike Inc. Case Number 2 Nike Incorporated’s cost of capital is a vital element when addressing opportunities regarding top-line growth and operating performance. Weighted Average Costs of Capital (WACC) is an essential estimation that is needed in order to determine the amount of interest that will be paid for each additional dollar financed. This translates to be the minimum overall required rate of return that the firm will keep. We disagree with Johanna Cohen’s assessment of Nike due to two
Premium
CHAPTER 9 THE COST OF CAPITAL (Difficulty: E = Easy‚ M = Medium‚ and T = Tough) Multiple Choice: Problems Easy: Cost of common stock Answer: d Diff: E [i]. Bouchard Company ’s stock sells for $20 per share‚ its last dividend (D0) was $1.00‚ and its growth rate is a constant 6 percent. What is its cost of common stock‚ rs? a. 5.0% b. 5.3% c. 11.0% d. 11.3% e. 11.6% Cost of common stock Answer: b Diff: E [ii]. Your company ’s stock
Premium Weighted average cost of capital Stock market Stock