This activity has the purpose of helping students apply the relevance concepts of Cost of Capital to a real situation. Instructions: Identify 2 or 3 companies’ capital structure, compare and analyze it.
Added by Nicholas R.
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For this example, we will analyze the capital structures of Apple Inc., Microsoft Corporation, and Google (Alphabet Inc.). Show more…
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Research publicly traded companies and select two companies in different sectors. Compare the capital structure for each and explain your conclusions on the similarities and differences. What support can you provide for why each company adheres to their chosen structuring mechanisms? Use in text citations and references o support your answer.
Akash M.
The goal of the project is to have students practice corporate financial decision-making workflow and apply qualitative and quantitative financial statements analysis to support core financial decisionmaking for a public company. The project requires students to focus on a pair of public companies in a specific industry and work on a series of aspects in financial management. Each aspect comes with detailed requirements and guidelines and here are the major aspects:  Part I. Financial Status Examination  Part II. Capital Investment Condition and Risk Analysis  Part III. Working Capital Management  Part IV. Cost of Capital Candidate industries and pertaining companies include:  Oil & Gas: CVS vs. XOM  Consumer Products: HD vs. LOW  Automotive: F vs. GM  Food & Beverage: KO vs. PEP Please select one industry from the above four. For the pair of companies of your selection, please visit their investor relationships section of their official websites. Download the 2023 10K and read the business description, usually first 10-20 pages on 10K. Financial performance monitoring is an important part of corporate financial management. Part I aims to get you familiar with extracting financial operation and performance information from publicly available information. Please collect relevant data and financial information and fill out the Part I Report with your best answer. Data and information is not limited to each firm’s 10-K, which can be downloaded on the company website. You may find a lot of financial media coverage and financial analysts’ follow-up for these companies. For any numbers, ratios, statement or comment used in your report, please provide the citation and reference list at the end of your report, unless ratios are calculated by yourself.
Breanna O.
Assignment instructions: The CFO of ABC plc is analyzing the capital structure of the organization. He claims that ABC is not financing itself in a way which reduces its cost of capital (WACC). The information below represents ABC's financing as at 31 December 2016: ÂŁ000 Ordinary shares, ÂŁ1 each 20,000 Reserves 5,000 7% preference shares, ÂŁ1 each 10,000 10% bonds (irredeemable 31 December 2016) 15,000 Total capital 50,000 Other information from the stock market (as at 31 December 2016): Ordinary share price (ex-div) ÂŁ2.65 Preference share price (ex-div) 75p Bond price for 10% bonds ÂŁ107 per ÂŁ100 Last 5 years' dividends (most recent last) 21p, 23p, 25p, 27p, 28p The CFO states that by issuing more debt, ABC will lower its cost of capital. He suggests issuing ÂŁ15m of 11 percent bonds. These bonds will be sold at a 5 percent premium to their par value and will mature after 7 years. The money will be used to repurchase ordinary shares, which ABC will further cancel. The CFO presumes that repurchasing will result in the organization's share price rising to ÂŁ2.85 and the future dividend growth rate to grow by 20 percent (relatively). He anticipates the price of the 10 percent bonds to be unaffected, but the price of the preference shares to drop to 68p. Corporate tax stands at 30 percent. You are required to: 1) Calculate the book value and market value cost of capital (WACC) for ABC plc. (35 marks) 2) Considering the proposed changes to ABC's capital structure, recalculate the organization's cost of capital to reflect these changes and comment on the CFO's forecasts. (35 marks) 3) Critically analyze whether you consider that organizations, by integrating a sensible level of gearing into their capital structure, can decrease their WACC, ensuring the response integrates relevant empirical research within this area of study. (30 marks)
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Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
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