Question
Companies in an industry and calculate their Debt equity ratio over 5 years, Calculate their the cost of capital., what is the optimal debt ratio
Companies in an industry and calculate their Debt equity ratio over 5 years, Calculate their the cost of capital., what is the optimal debt ratio for your firm as compared to industry? • Bringing in reasonable constraints into the decision process, what would your recommended debt ratio be for this firm? • Does your firm have too much or too little debt o relative to the sector? o relative to the market? • What are the different kinds or types of financing that this company has used to raise funds? Where do they fall in the continuum between debt and equity? • How large, in qualitative or quantitative terms, are the advantages to this company from using debt? • How large, in qualitative or quantitative terms, are the disadvantages to this company from using debt? • From the qualitative trade-off, does this firm look like it has too much or too little debt? • If your firm's actual debt ratio is different from its recommended" debt ratio, how should they get from the actual to the optimal? In particular, o should they do it gradually over time or should they do it right now? o should they alter their existing mix (by buying back stock or retiring debt) or should they take new projects with debt or equity?
o What type of financing should this firm use? In particular, should it be short-term or long-term? what currency should it be in? what special features should the financing have?
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The Debt Equity ratio of a company is calculated by dividing the total debt of the company by the total equity This ratio gives an indication of the c...Get Instant Access to Expert-Tailored Solutions
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