Optimal capital structure

Assignment Help Financial Management
Reference no: EM13880558

In real-life companies do not change their capital structure as often as you might think after reading all the capital structure theories. Explain one reason why a firm might not move towards its optimal capital structure even if it knows what that optimal point is.

Reference no: EM13880558

Questions Cloud

What other type of option strategy : A chooser option is similar to what other type of option strategy
Holiday tours has employment contract with newly hired : Holiday Tours (HT) has an employment contract with its newly hired CEO. The contract requires a lump sum payment of $26 million be paid to the CEO upon the successful completion of her first three years of service. HT wants to set aside an equal amou..
Company have to wait before expanding its operations : Meadow Brook Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $28 million. Management has decided to save $1.4 million a quarter for this purpose. The firm earns 6 percent compounded q..
What is the bonds nominal coupon interest rate : Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal yield to maturity is 9.25%, they pay interest semi annually, and they sell at a price of $950. What is the bond's nominal coupon interest rate?
Optimal capital structure : In real-life companies do not change their capital structure as often as you might think after reading all the capital structure theories. Explain one reason why a firm might not move towards its optimal capital structure even if it knows what that o..
Compounding frequency and time value : Compounding frequency and time value: You plan to invest $2,000 in an individual retirement arrangement (IRA) today at a nominal annual rate of 8%, which is expected to apply to all future years. What is the effective annual rate (EAR) for each compo..
Calculating portfolio betas : You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.29 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
What is the future value of these cash flows : If the discount rate is 6 percent, what is the future value of these cash flows in Year 4? What is the future value at an interest rate of 14 percent?  What is the future value at an interest rate of 21 percent?
Make a single investment for retirement : Peter would like to make a single investment and have $1.7 million at the time of her retirement in 34 years. He has found a mutual fund that will earn 5 percent annually. How much will Peter have to invest today? If Peter earned an annual 17 percent..

Reviews

Write a Review

Financial Management Questions & Answers

  A project that provides a constant annual cash flow

A project that provides a constant annual cash flow of $1,930 for eight years costs $7,700 today. Calculate the NPV at an 8% discount rate. Note: NPV = sum of the present values of all (positive and negative) cash flows

  After tax cost of capital to walgreen for the bonds

The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1000 par value bonds with a 15 year maturity at a price of $953 that carries a coupon interest rate of 12.6 percent that ..

  Projects are mutually exclusive-produces annual cash flows

Project H requires an initial investment of $100,00 that produces annual cash flows of $45,000 per year for each of the next 3 years. Project T also requires an initial investment of $100,000 and produces cash flows of $30,000 in year 1, $40,000 in y..

  Define what is the effective rate of interest

firm a stated rate of 10 percent interest. What is the effective rate of interest if the loan carries a simple 10 percent interest with a 20 percent compensating balance

  What is the firms degree of financial leverage

Irresistible Chips is reviewing its financial condition. Sales are $15,667,426 from which the firm generated an operating profit of $2,445,157 and a net profit after tax of $943,674. The firm’s interest expense was $1,192,195.

  Find the weighted average cost of capital

Based on the information below, calculate the weighted average cost of capital -Two thousand shares of preferred are outstanding, each of which pays an annual dividend of $7.50. They originally sold to yield 15% of their $50 face value. They''re no..

  What is compound interest

How does continuous compounding benefit an investor?

  Calculate the expected price of the stock

A stock you are interested in paid a dividend of $1 this morning. If you buy the stock today, you will get the first dividend after one year. The anticipated growth rate in dividends and earnings is 25% for the next 2 years before settling down to a ..

  Calculate economic order quantity

An appliance for less is a local appliance store. It costs the store $2.4 per unit annually for storage, insurance act. To hold microwave in their inventory. Sales this year are anticipated to be 632 units. Each order costs $21. The company is using ..

  Long-term borrowing to meet working capital needs

Compare and contrast the advantages and disadvantages of short- and long-term borrowing to meet working capital needs.

  Managing effective teams scenario questionsstarting a new

scenario questions ltbrgt ltbrgt ltbrgt?starting a new product or service line that will require new kinds of employees

  An individual is saving for retirement

An individual is saving for retirement. He has $100,000 right now and is trying to have $1.5 million in 25 years. If he can earn 5%, how much must be invest each month in order to reach his goal? At retirement the investor decides to withdraw $8000 e..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd