Financial Policy Writing Assignment
Your assignment:
Assume that you report to Elizabeth Jenkins at Clark Corporation. She has asked you to recommend a debt and equity percentage mix for the Clark Corporation capital structure. You need to write her a memo recommending a well balanced capital structure of 40% debt and 60% equity. Your memo will consist of three paragraphs. The first paragraph is already provided for you below. You only need to write by yourself the second and third paragraph.
The first paragraph, which is provided below, includes your recommendation. Your recommendation reflects a reasonable balance between debt and equity.
The second paragraph, which you will write, should present your reasons for not having too much debt in the capital structure. The third paragraph, which you will also write, should present your reasons for not having too much equity in the capital structure.
Your reasons for not having too much debt or too much equity must all be taken from the class Capital Structure lecture posted on Blackboard Learn. Your written comments are not to make use of online material or other outside reference material. You must write the writing assignment on your own.
Your grade will be based on (1) how well your two paragraphs are written; (2) how well you have presented arguments from the class lecture against having too much debt or too much equity in the capital structure and (3) how well you have followed the assignment instructions. You should raise all the key points to support your recommendation, yet also be concise.
Provided below is the start of your memo including the first paragraph. Copy this first paragraph and then add on the two additional required paragraphs.
To: Elizabeth Jenkins
From: (your name)
Subject: Recommended Capital Structure
In response to your request, I am recommending that Clark Corporation pursue a reasonably balanced capital structure of approximately 40% debt and 60% equity. A well balanced capital structure will favorably affect our weighted average cost of capital and our financial flexibility.