GROUP CASE STUDY PROJECT Cost of Capital & Capital Structure Capital structure deals with a very important financial management question. In the financial management context, the objective of any financial decision is to maximise the shareholder's wealth or increase the value of the firm. Changing the financial means changing the level of debts. This change in levels of debts can impact the interest payable by that firm. The decrease in interest would increase the net income and thereby the Earnings per Share ("EPS") and it is a general belief that the increase in EPS leads to an increase in the value of the firm. Capital comes primarily in the form of debt or equity. Debt financing has two (2) important advantages (1) The interest paid is tax deductible whereases dividends paid on shares are not deductible, which lowers debt's relative cost and (2) The return on debt is fixed, so shareholders do not have to share the firm's profits if the firm turns out to be extremely successful However, debt also has disadvantages: (1) Using more debt increases the firm's risk and that raises the costs of debt and equity and (2) If the company falls on hard times and its operating income is not sufficient to cover interest charges, the firm may go bankrupt. Good times may be just around the corner but too much debt can bankrupt the company before it reaches the comer. Use the five (5) financial years ("FYE's) of the following Malaysian public listed companies AirAsia Berhad ("AirAsia") and Time dotCom Berhad ("Time") from the FYE2015 to FYE2019 to describe and analyse the following questions: 1. In general, identify the trade-offs that companies must consider when they determine their target capital structure; 2. Describe in general for both PLCs' company profile of its Management and Operations: 3. Present the capital structure comprise mix of debt, preferred shares and ordinary shares (in value and %). Revenues, Interest expense, Earnings After Taxation ("EAT). Earnings per Share ("EPS") for both PLCs in presentable format (charts, graphs etc) for all the FYEs under review, and 4. Discuss the above findings and whether the appropriate capital structure is able to answer the proposition that the more leveraging of its capital structure it will leads to an increase in value of the firm for both PLCs. Both PLCs financial information are extracted from the respective PLCs' Annual Report for FYE 2015 to FYE2019 as attached in Attachment Attachment] 1. AirAsia Berhad ("AirAsia") Annual Reports AAFYE2015 pdf AAFYE2016.pdf AAFYE2017.pdf AAFYE2018 pdf AAFYE2019.pdf 2. Time dotCom Berhad ("Time") Annual Reports TIME-Com Annun TIME-dotCom-Anne TIME-dotCom Annua TIME-dotCom Annun TIME do Com Annua 1 Report 2015 pdf I Report 2016 pdf 1 Report 2017 pdf 1 Report 2018 pdf I Report-2019.pdf GROUP CASE STUDY PROJECT Cost of Capital & Capital Structure Capital structure deals with a very important financial management question. In the financial management context, the objective of any financial decision is to maximise the shareholder's wealth or increase the value of the firm. Changing the financial means changing the level of debts. This change in levels of debts can impact the interest payable by that firm. The decrease in interest would increase the net income and thereby the Earnings per Share ("EPS") and it is a general belief that the increase in EPS leads to an increase in the value of the firm. Capital comes primarily in the form of debt or equity. Debt financing has two (2) important advantages (1) The interest paid is tax deductible whereases dividends paid on shares are not deductible, which lowers debt's relative cost and (2) The return on debt is fixed, so shareholders do not have to share the firm's profits if the firm turns out to be extremely successful However, debt also has disadvantages: (1) Using more debt increases the firm's risk and that raises the costs of debt and equity and (2) If the company falls on hard times and its operating income is not sufficient to cover interest charges, the firm may go bankrupt. Good times may be just around the corner but too much debt can bankrupt the company before it reaches the comer. Use the five (5) financial years ("FYE's) of the following Malaysian public listed companies AirAsia Berhad ("AirAsia") and Time dotCom Berhad ("Time") from the FYE2015 to FYE2019 to describe and analyse the following questions: 1. In general, identify the trade-offs that companies must consider when they determine their target capital structure; 2. Describe in general for both PLCs' company profile of its Management and Operations: 3. Present the capital structure comprise mix of debt, preferred shares and ordinary shares (in value and %). Revenues, Interest expense, Earnings After Taxation ("EAT). Earnings per Share ("EPS") for both PLCs in presentable format (charts, graphs etc) for all the FYEs under review, and 4. Discuss the above findings and whether the appropriate capital structure is able to answer the proposition that the more leveraging of its capital structure it will leads to an increase in value of the firm for both PLCs. Both PLCs financial information are extracted from the respective PLCs' Annual Report for FYE 2015 to FYE2019 as attached in Attachment Attachment] 1. AirAsia Berhad ("AirAsia") Annual Reports AAFYE2015 pdf AAFYE2016.pdf AAFYE2017.pdf AAFYE2018 pdf AAFYE2019.pdf 2. Time dotCom Berhad ("Time") Annual Reports TIME-Com Annun TIME-dotCom-Anne TIME-dotCom Annua TIME-dotCom Annun TIME do Com Annua 1 Report 2015 pdf I Report 2016 pdf 1 Report 2017 pdf 1 Report 2018 pdf I Report-2019.pdf
