Explanation of the various views of optimal capital structure. Explanation of the relevance or irrelevance of...

Explanation of the various views of optimal capital structure.

Explanation of the relevance or irrelevance of Dividend policy based on real world factors. Do not copy and paste from your lecture notes or textbook but use your own words only.)

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Question 1. Capital structure refers to the mix of a company's capitalisation. That is a a mix of long term sources of funds such as debentures, preference share capital, equity share capital and retained

earnings. It is for meeting the total capital requirement.

While choosing a suitable Capital structure various factors need to be taken into consideration like cost, risk,

control, flexibility and other considerations like nature of

industry, competition in the industry etc.

The decision in relation to the financing of firms assets is very crucial in every business. The financial manager is often in a dilemma to choose the optimum portion of debt and equity.

Importance of optimal capital structure is

1. Value maximization of the company.

2. cost minimization.

3. Growth of the company increases.

4. Increase in the share price.

jeff jeffy answered 2 years ago

Explanation of the various views of optimal capital structure.300 words

Explanation of the relevance or irrelevance of Dividend policy based on real world factors.

What are the various steps involved in identifying optimal capital structure? Explain. What are the various...

What are the various steps involved in identifying optimal capital structure? Explain. What are the various steps involved in recapitalizing debt financing? Explain.

Evaluate the relevance or irrelevance to efficiency and effectiveness

Which of the following statements best describes the optimal capital structure? a. The optimal capital structure...

Which of the following statements best describes the optimal capital structure? a. The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company's earnings per share (EPS). b. The optimal capital structure is the mix of debt, equity, and preferred stock that minimizes the company's cost of preferred stock. c. The optimal capital structure is the mix of debt, equity, and preferred stock that minimizes the company's cost of debt. d. The optimal capital...

Explain the Modigliani & Miller (M&M) capital structure irrelevance principle

9. Determining the optimal capital structure Understanding the optimal capital structure Review this situation: Transworld Consortium...

9. Determining the optimal capital structure Understanding the optimal capital structure Review this situation: Transworld Consortium Corp. is trying to identify its optimal capital structure. Transworld Consortium Corp. has gathered the following financial information to help with the analysis. Debt Ratio Equity Ratio rdrd rsrs WACC 30% 70% 7.00% 10.50% 8.61% 40% 60% 7.20% 10.80% 8.21% 50% 50% 7.70% 11.40% 8.01% 60% 40% 8.90% 12.20% 8.08% 70% 30% 10.30% 13.50% 8.38% Which capital structure shown in the preceding table is...

8. Determining the optimal capital structure Understanding the optimal capital structure Review this situation: Universal Exports...

8. Determining the optimal capital structure Understanding the optimal capital structure Review this situation: Universal Exports Inc. is trying to identify its optimal capital structure. Universal Exports Inc. has gathered the following financial information to help with the analysis. Debt Ratio Equity Ratio EPS DPS Stock Price 30% 70% 1.55 0.34 22.35 40% 60% 1.67 0.45 24.56 50% 50% 1.72 0.51 25.78 60% 40% 1.78 0.57 27.75 70% 30% 1.84 0.62 26.42 Which capital structure shown in the preceding table...

does an optimal capital structure exist

mod 8 1. Define and give examples of positive relevance, negative relevance and irrelevance.

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