Answer the following questions related to the publicly traded company you selected for the corporate governance paper.
Question 1: Using information obtained from FactSet, describe the company's capital structure. Be sure to discuss the overall mix of equity vs. debt, the various types of equity, the various types of debt, the mix of short-term vs. long-term debt, and the trends in these over time. Which of the capital structure theories/factors discussed in the readings are relevant to your company's situation? Explain.
Question 2: In the Module 3 WACC Project you used the current market values of debt and equity to compute the WACC. This is a good practice if the company's capital structure is near its target capital structure. We will now assume that the company is changing its capital structure. Re-evaluate the capital project presented in the Module 2 Capital Budgeting Project under the following mutually exclusive scenarios. 1) The company funds the entire initial investment (CF0) by issuing additional long-term debt. 2) The company funds the entire initial investment (CF0) by issuing common equity. Under both scenarios, assume the costs of the individual sources of capital do not change. In other words, update the 'weights' but not the costs in the WACC formula.
Question 3: Use the hypothetical WACC values from the two scenarios in #2 above to re-evaluate the capital project from the Module 2 Capital Budgeting Project (i.e. discount the cash flows from the Capital Budgeting Project using the two new rates). Indicate your recommendation whether to move forward with the project under each scenario.
Question 4: Using information obtained from FactSet, describe the company's payout policy. Include a discussion of the types of payout and recent trends. Which of the payout policy theories/factors discussed in the readings are relevant to your company's situation? Explain.
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