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...