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Finance Capital Structure Decision and the Cost of Capital

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Considering the following three companies:
i) eBay
ii) The Clorox Company (CLX)
iii) Alaska Air Group (NYS: ALK).

Upon reviewing total debt/equity ratios, company betas, profitability ratios, company revenue, assets, and liabilities, and the nature of the operations of the companies including the nature of their customers and products, what would you recommend should be the capital structure (total liabilities or debt and equity proportions) for each of the three companies?

Includes the following information:
- The nature of the business in brief (all three companies).
- Total current assets and long-term assets of all three companies.
- Total current liabilities and long-term liabilities of all three companies.
- Revenue of each company.
- Total debt/equity ratios of all three companies.
- Profit margin, return on assets, and return on equity ratios of all three companies.
- Betas of all three companies.
- The riskiness of all three companies in brief (e.g., the higher the beta, the higher the risk).
- The advantages and disadvantages of debt over equity financing.

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Solution Summary

This solution reviews debt/equity ratios, profitability ratios, company revenue, assets, and liabilities and operations. The solution recommends the capital structure (total liabilities or debt and equity proportions).

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Good morning,

Please find an Excel file attached with all your answers. As you scroll down the excel sheet you will find ...

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