I attached the file
Examine the following document:
Revenues $ 1,000,000
- Cost of goods sold $ 400,000
- Depreciation 100,000
- Salaries and wages 200,000
Bond interest (8% debentures sold at maturity value of $1,000,000) 80,000
Dividentds declared on 6% preferred stock (par value $500,000) 30,000
Dividentds declared of $5 per share on common stock (20,000 shares outstanding) 100,000
Based on this information complete the following tasks:
1. Determine the income under each of the following equity theories:
o Proprietary theory
o Entity theory (orthodox view)
o Entity theory (unorthodox view)
o Residual theory
2. Would any of your answers change if the preferred stock is convertible at any time at the ratio of 2 preferred shares for 1 share of common stock?
Calculation shown for you. I have also provided necessary explanatory notes and calculations where necessary. No references.
Capital Structure: Trade Off Theory
"Optimal leverage refers to the amount of debt in a firm's capital structure, which minimizes the firm's cost of capital and thus maximizes its market value".
Please read the attached documents and discuss the above statement by illustrating how the optimal mix of debt and equity in capital structure is attained where there is a trade-off between the expected benefits and costs of debt financing.
Do NOT references/quote anything from the attached documents, please use other external sources.
And please use Harvard referencing.