Week 5 Capital Structure Assignment Steps Show Research
Week 5 Capital Structureassignment Steps Show Research On The Matte
Show research on the matter that is properly cited and referenced according to APA with references. Create a substantive message that includes a personal or professional experience as it relates to the theory, providing examples.
Describe an efficient capital market for stocks.
Compare and contrast the weak form of market efficiency with the strong and semi-strong forms.
Explain the relevance of market efficiency for financial managers.
Distinguish how maximizing the value of the corporation differs from maximizing shareholder interests.
Explain how leverage can improve returns to the shareholders.
Describe the impact of corporate taxes on the weighted average cost of capital.
Distinguish between direct and indirect costs in a corporate bankruptcy.
Describe agency costs and the impact on bondholders.
Explain the application and implications of the pecking-order theory.
Memo
To:
From:
Date:
Subject:
Good afternoon, XXXXX, Opening: this is a chance to diffuse tension and set the tone for the memo. Kindly and very briefly state the point of the memo.
Summary: the body. Here you will present FACTS, not opinions, to allow the read to make an informed decision.
Closing: the final remarks are a call to action. Invite the reader to contact you with any further questions.
Signature
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Contact info (can be fake for class)
Effect of Debt Issuance on Stock Valuation Memo Assignment Steps - Resources:
Corporate Finance Scenario: Hightower, Inc. plans to announce it will issue $2.0 million of perpetual debt and use the proceeds to repurchase common stock.
The bonds will sell at par with a coupon rate of 5%. Hightower, Inc. is currently an all-equity company worth $7.5 million with 400,000 shares of common stock outstanding.
After the sale of the bonds, the company will maintain the new capital structure indefinitely. The company currently generates annual pretax earnings of $1.5 million. This level of earnings is expected to remain constant in perpetuity.
The tax rate is 35%. Prepare a 200-word memo advising the management of Hightower, Inc. on the financial impact, including the following:
• What is the required return on the company's equity after the restructuring? – Carolina IMPORTANT Show all calculations (Excel) and submit with your memo (200 words minimum per team member).