FIN501 - Strategic Corporate Finance Module 4 - Case - 9997

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Capital Structure Decision and the Cost of Capital

 

 

 

In simple words, the capital is the combination of debt and equity used to finance a company. The background readings of this Module provide plenty of information regarding both the issue of the capital structure decision and the concept of the weighted average cost of capital.

 

 

 

Consider three companies: Mattel, Clorox, and MGM Resorts International. Reflect on the nature of the business of these three companies. You are recommended to also get to the web site of one company in each of these categories. You might also check what the beta of each of these companies is.

 

 

 

Based on the readings of the Module, and upon reviewing the nature of the operations of the companies including the nature of their customers and products, what would you recommend should the capital structure (total liabilities or debt and equity proportions) be for each of the three companies? 

 

 

 

Note that you are not asked to provide specific numbers, just 'low debt ratio', 'medium debt ratio' or 'high debt ratio'. (Do not quote the actual company's capital structure or their debt-to-equity ratios as per their balance sheet.) 

 

 

 

Write a 5 pages report explaining your recommendations for each of these three companies. Consider the nature of their business, the riskiness of the company, and the advantages and disadvantages of debt over equity financing in your answers.

 

 

 

What do you perceive you have learnt in Module 4 Case Assignment? Please provide your evaluation of the Module 4 Case Assignment in brief.

 

 

 

NOTE: Please note that your report/assignment will not be accepted without proper citations and references. You must use the sources from the background material together with the sources you find your own.  

 

 

 

Case Assignment Expectations:

 

 

 

In Module 4 Case Assignment, you are expected to:

 

 

 

?Describe the purpose of the paper and conclusion.

 

 

 

?Answer the case assignment questions clearly and provide necessary details. Your very first paragraph should include a direct answer to the assignment question, with the body of your paper focused on defending your answer. See the attached Tips for Good Writing for more detail on these expectations.

 

 

 

?Provide a quality argument; that is, no poor sentence structure, no spelling and grammar mistakes or run-on sentences.

 

 

 

?Provide citations to support your argument and references on a separate page. Please use APA format to provide citations and references [http://owl.english.purdue.edu/owl/resource/560/01/].  

 

 

 

?Answer all the case assignment questions in an essay format instead of point format. Please do not type questions in the paper.

 

 

 

?Type and double space the paper.

 

 

 

? The following criteria will also be used to assess your paper:

 

 

 

>Precision: Does the paper address the question(s) or task(s)?

 

 

 

>Breadth: Is the full breadth of the subject, i.e., all the keys to the assignment, addressed?

 

 

 

>Depth: Does the paper/report address all elements of the topic in sufficient depth? Does it include and apply the background readings and other background resources? Are they included as references?

 

 

 

>Critical thinking: Are the concepts of this module applied accurately, logically, and relevantly?

 

 

 

>Organization: Is the paper organized in a coherent and systematic manner? Are headings included in all papers greater than 2 pages?

 

 

 

>Clarity: Is the writing clear and the concepts articulated properly? Are paraphrasing and synthesis of concepts the primary means of response to the questions, or are thoughts conveyed through excessive use of quotations?

 

 

 

Solution Description

 

Capital Structure Decision and the Cost of Capital

 

 

 

In simple words, the capital is the combination of debt and equity used to finance a company. The background readings of this Module provide plenty of information regarding both the issue of the capital structure decision and the concept of the weighted average cost of capital.

 

 

 

Consider three companies: Mattel, Clorox, and MGM Resorts International. Reflect on the nature of the business of these three companies. You are recommended to also get to the web site of one company in each of these categories. You might also check what the beta of each of these companies is.

 

 

 

Based on the readings of the Module, and upon reviewing the nature of the operations of the companies including the nature of their customers and products, what would you recommend should the capital structure (total liabilities or debt and equity proportions) be for each of the three companies? 

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Attachments
Module 4 case.docx
Module 4 case.d...