20 Mar Assess the Impact of A Firms Financing Decisions on Its Capital Structure and Shareholder Distribution Policy
Topic: Assess the Impact of A Firms FinancingDecisions on Its Capital Structure and Shareholder Distribution Policy.
Pages and Word Count: 5 pages (1,375 words)
Reference: 1 Peer-reviewed journal article ONLY.
Feel free to utilize graph or picture but cite them per APA7. (https://aut.ac.nz.libguides.com/APA7th/figures)
Answer from other students attached. (might NOT becorrect.)
Introduction: NO need. Conclusion: NO need.
1. Q1
a. What is meant by capitalization? (50 words)
b. What is meant by a firms capital structure? (50 words)
c. For financial planning purposes, explain why either book ormarket value should be used to determine the firms capital structure. (50 words)
d. What is capital structure theory? (50 words)
2. Q2. Discuss the following issues relating to business risk andfinancial risk.
a. What is the difference between business risk and financial risk?Explain some of the factors that contribute to each. (50 words)
Evaluate Moore Plumbing Supplys level of business risk. (50 words)
b. How do these risks relate to total risk? (50 words)
c. How does business risk affect capital structure decisions? (50words)
3. Discuss the following issues relating to Modigliani and Millers(MM) 1958 capital structure model.
a. What was the importance of the model? (100 words)
b. What are the basic assumptions of the model? (100 words)
4. Discuss MMs later models (1963) in which they relaxed theno-tax assumption and added corporate taxes. Discuss Proposition I and II.Miller added personal taxes to the model in his 1976 Presidential Address tothe American Finance Association. What happens to Millers model, in general,if there are no corporate or personal taxes? What happens when only corporatetaxes exist? (200 words)
5. Briefly describe the asymmetric information theory of capitalstructure. (200 words)
What are its implications for financial managers? (150 words)
6. Prepare a summary of the implications of capital structuretheory that can be presented to Tom Moore. What insights can capital structuretheory provide managers regarding the factors which influence their firmsoptimal capital structures? (100 words)
7. Finally, what recommendations would you make about the capitalstructure of Moore Plumbing Supply Company? Justify your answer. (100 words)
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