Describe briefly Intel’s current capital structure. Discuss whether in your view this capital structure is optimal for Intel‚ with particular emphasis on the pros and cons of Intel’s substantial cash holdings. Articulate and defend a “target” capital structure for Intel. Cee Capital Structure As shown in the financial income statement (Exhibit3)‚ Intel Corp. (INTC) has a capital structure consisting most of equity. Intel has very little debt in its capital structure and the cost of debt would have
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The optimal capital structure Is there such a thing? Is there an Optimal Capital Structure? • Miller and Modigliani: • 1. You cannot derive value from financing strategies. If you finance with debt in a world with taxes‚ then you might add value from interest payments tax shields • Question: • If this is true for everyone‚ then why do not find more debt financing in more companies‚ i.e you find little debt in technological companies Myers and the Pecking Order • Prof. Myers found the following
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no costs of financial distress or bankruptcy‚ what percentage of the firm’s capital structure would be financed by debt? 3 Exercise 3 The Holland Company expects perpetual EBIT of $4 mil. per year; the firm’s after-tax‚ all-equity discount rate (r0) is 15%; company is subject to the tax rate of 35%; the pre-tax cost of the firm’s debt capital is 10% p.a.‚ and the firm has $10 mil. of debt in its capital structure. What is Holland’s value? What is Holland’s cost of equity (re)? What
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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. As a business owner‚ it is important to know the value of your assets as they can be used as leverage for obtaining loans and can be used to estimate your ability to repay your
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Solution 1: (i) P0 = D1 Ke - g CA – IPC TEST CAPITAL STRUCTURE = 3.50 (1.06) 0.15 – 0.06 = `41.22 (ii) Ke = D1 + g P0 0.15 = 3.50 (1 + g) + g 50 7.50 = 3.50 + 3.50g + 50g g= 4 = 7.48% 53.5 Solution 2: (i) Determination of EPS at EBIT level of `22‚00‚000 Financing Plan (a) (b) Equity Shares (`) Debentures (`) Pref. EBIT 22‚00‚000 22‚00‚000 Less: Interest (16‚000) (1‚21‚000) Taxable Income 21‚84‚000 20‚79‚000 Less: Tax @ 30% (6‚55‚200) (6‚23‚700) EAT 15‚28‚800 14‚55‚300 Less: Dividend on Pref
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What Are the Differences in Organizational Structures? Organizational structure development is driven by an organization ’s type. According to Lamar University‚ organizational structure is‚ “the formal system of task and reporting relationships that controls‚ coordinates‚ and motivates employees so that they cooperate to achieve an organization ’s goals.” Depending on the type of business or organization‚ the organizational structure will be developed differently. For example‚ if you were running
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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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Capital Expenditures in the Hospitality Industry Abstract Hotels of any size are costly investments to begin with. The costs involved in maintaining the property to the necessary levels to keep attracting customers can at times be very high. Capital expenditures projects in the hospitality industry are primarily focused on the achievement of customer safety and comfort in a clean‚ friendly‚ and healthy environment. This paper will describe what capital expenditures are‚ what is involved in setting
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Environmental Dynamism‚ Capital Structure and Performance: A Theoretical Integration and an Empirical Test Author(s): Roy L. Simerly and Mingfang Li Source: Strategic Management Journal‚ Vol. 21‚ No. 1 (Jan.‚ 2000)‚ pp. 31-49 Published by: John Wiley & Sons Stable URL: http://www.jstor.org/stable/3094118 Accessed: 07/12/2009 10:37 Your use of the JSTOR archive indicates your acceptance of JSTOR ’s Terms and Conditions of Use‚ available at http://www.jstor.org/page/info/about/policies/terms.jsp.
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Case Study Drivers of Industry Financial Structure Executive Summary KR+H is a manufactory company in cabinet industry and it had devised a unique operating strategy of producing high quality custom cabinets at a low cost. Because the investments will reduce costs and increase the working efficiency in manufacturing process. And the analysis will show that adding investment is valuable and profitable. Based on KR+H’s past financial performance
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