Gb 550 Financial Management Unit 1 Final Project

GB 550 Financial Management Unit 1 Final Project

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GB 550 Financial Management Unit 1 Final Project

Unit 1 Final Project Overview:

The Final Project is due at the end of Unit 5.

Overview

The purpose of the Final Project Research Paper is to examine capital-structure theory, issues, and

debates, while showing how capital-structure choices affect a firm’s return on investment (ROI) and

its risk profile.

Directions

Your Assignment is to select a publicly-held company and to analyze its capital structure, applying the

theories and principles found in Chapter 15 of the text.

The structure of your research paper should include:

A preview of capital structure issues•

Business and financial risks related to capital structure•

Modigliani and Miller’s [MM] capital-structure theory•

Criticisms of the MM model and assumptions•

Capital structure evidence and implications•

Estimating the firm’s optimal capital structure•

A firm’s optimal capital-structure is that mix of debt and equity that maximizes the stock price. At any

point in time, management has a specific target capital structure in mind, presumably the optimal one,

though this target may change over time. For example, financial management may choose a 50%

equity financing [stock] and 50% debt [bond] financing.

Several factors influence a firms’ capital structure, including:

Business risk•

Tax position•

The need for financial flexibility•

Managerial conservativeness•

Growth opportunities•

Business risk is the riskiness inherent in the firm’s operations if it uses no debt.

This report is intended to be a capital structure analysis of your selected public company. Your paper

is intended to be an executive summary of your analysis, and is limited to a minimum of 5 – 7 pages

of text, excluding the title page, table of contents, graphs, charts, tables, etc.

This summary report of your selected...