QUESTIONS;
1. What is capital structure?
2. Assuming taxes exist, why the value of levered firm is always greater than the value of unlevered firm?
3. Discuss advantages and disadvantages of using equity and debt in the capital structure.
4. Discuss at least five determinants of capital structure.
5. Identify and discuss various sources of funds a firm may use to finance its business operations.
6. The cost of Mamboleo Ltd, an all equity firm is 14%. What is the WACC of the firm?
7. (a) Define the following terms as they are used in capital structure;
(i) leverage
(ii) Gearing
(iii)Levered firm
(iv)Unlevered firm
(v) Optimal capital structure
(b) Explain the relationship between the value of levered firm and unlevered firm.
(c) Why do you think it is important for financial managers to understand the capital structure and value of the firm concepts?
10. (a) Discuss the following theories of capital structure;
(i) MMI (without Taxation) Theory
(ii) MMII (with taxes) Theory
(iii) Pecking Order Theory
(iv) Static Trade off Theory
(b) Given the following information about ABC Ltd, what would the cost of capital be if it was transformed from its current gearing to having no debt, if Modigliani and Miller̓ s model with no tax applied?
0 comments:
Post a Comment