Best Alternative Capital Structure
Not what you're looking for?
Which alternative capital structure is more advantageous? Why?
Purchase this Solution
Solution Summary
Solution gives 3 options for debt/equity composition in a business, with brief analysis of their risks, in 500 words.
Solution Preview
Capital structure means mix composition of debt and equity in the organization. It affects the cost of capital of the organization. A firm's long-term success depends upon the firm's investments earning a sufficient rate of return. This sufficient or minimum rate of return necessary for a firm to succeed is called the cost of capital.
The cost of capital can also be viewed as the minimum rate of return required keeping investors satisfied. Thus it is used to know the rate of return expected by the investors.
Cost of capital (WACC)=
(Cost of Equity x Proportion of equity from capital)+ (Cost of debt x Proportion of debt from capital)+ (Cost of Preference share x Proportion of preference share from capital).
Equity includes retained earnings and the cost of R/E is taken at cost of equity. Cost of ...
Purchase this Solution
Free BrainMass Quizzes
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.