DUE 1/31/2021. 11PM EST. 2 pages maximum. Attached is the complete document for the assignment
I. Capital Structure
a) Discuss three practical considerationsthat would guide you in selecting an optimal capital structure for your firm.
b) Rank the considerations from most important to least important and explain why.
II. WACC
a) Select two firms within the same industry and calculate the WACC for each firm.
b) Discuss how the WACCs compare.
c) Discuss whether the WACCs are what you would expect.
d) Discuss what might cause the differencesin the two WACCs.
FIN 685 Case Study Four Guidelines and Rubric
Capital structure is the percentage of a company’s operating money acquired via debt or equity. It is also an acutely importa nt management decision as it impacts
a company’s risk profile. The weighted average cost of capital (WACC) is an important tool for the capital structure. The cost of capital is a minimum rate of return
on a project for the firm. The cost of capital is inversely related to the value of the firm. The lower the WACC is, the higher the firm’s value. This case study will
provide you an opportunity to explore practical considerations of an optimal capital structure and to calculate the WACC of two firms within the same industry.
Prompt: First, discuss three practical considerations that would guide you in selecting the optimal capital structure for your firm. Rank these considerations from
the most to the least important and explain why you ranked them in that way. Next, go to the website Yahoo! Industry Summary and select two firms within the
same industry. The industry may be that in which you currently work or it may be in another industry that interests you. Calculate the WACC for the two firms.
Discuss how the WACCs compare and also discuss whether the WACCs are what you would expect. Lastly, discuss what might cause the differences between the
two firms’ WACCs.
Specifically, the following critical elements must be addressed:
I. Capital Structure
a) Discuss three practical considerations that would guide you in selecting an optimal capital structure for your firm.
b) Rank the considerations from most important to least important and explain why.
II. WACC
a) Select two firms within the same industry and calculate the WACC for each firm.
b) Discuss how the WACCs compare.
c) Discuss whether the WACCs are what you would expect.
d) Discuss what might cause the differences in the two WACCs.
https://biz.yahoo.com/p/sum_conameu.html
Rubric
Guidelines for Submission: Your paper must be submitted as a 2-page (maximum) Microsoft Word document with double spacing, 12-point Times New Roman
font, one-inch margins, and at least 2 sources, in addition to the textbook, cited in APA format.
Critical Elements Exemplary (100%) Proficient (90%) Needs Improvement (70%) Not Evident (0%) Value
Capital Structure:
Practical
Considerations
Meets “Profi ci ent” cri teri a and
di s cus sion us es s chol arly
res earch to s upport i deas
Di s cus s es practical
cons i derati ons that woul d
provi de gui dance i n s el ecti ng
an opti mal capi tal s tructure for
a fi rm
Di s cus s es practical
cons i derati ons but l acks detai l
Does not di s cus s practi cal
cons i derati ons
15
Capital Structure:
Rank and Why
Meets “Profi ci ent” cri teri a and
expl anati on us es s chol arly
res earch to s upport i deas
Ranks the cons i derati ons from
mos t i mportant to l eas t
i mportant and expl ai ns why the
ranki ng was chos en
Ranks the cons i derati ons but
expl anati on l acks detai l
Does not rank nor expl ai n
ranki ng
15
WACCs: Calculation Correctl y cal cul ates the WACCs
for the fi rms
Cal cul ates the WACCs for the
fi rms wi thi n the s ame i ndus try,
but s ome ans wers may not be
correct
Cal cul ates the WACCs for the
fi rms but no ans wer i s correct
Does not cal culate the WACC 15
WACCs:
Comparison
Meets “Profi ci ent” cri teri a and
compari s on i s particularly
comprehens i ve
Compares the two WACCs Compares the two WACCs but
compari s on l acks detai l
Does not compare the two
WACCs
15
WACCs:
Expectation
Meets “Profi ci ent” cri teri a and
s upports the di s cus sion wi th
i nformati on from cours e
s ources
Di s cus s es whether the WACCs
al i gn wi th expectati ons
Di s cus s es whether the WACCs
al i gn wi th expectati ons but
di s cus sion l acks detai l
Does not di s cus s whether the
WACCs al i gn wi th expectati ons
15
WACCs:
Cause of Differences
Meets “Profi ci ent” cri teri a and
s upports the di s cus sion wi th
i nformati on from cours e
s ources
Di s cus s es the caus e of the
di fferences i n the two WACCs
Di s cus s es the caus e but l acks
detai l
Does not di s cus s the caus e of
di fferences
15
Articulation of
Response
Submi s s i on i s free of errors
rel ated to ci tati ons , grammar,
s pel l i ng, s yntax, and
organi zati on and i s pres ented
i n a profes s i onal and eas y to
read format
Submi s s i on has no major errors
rel ated to ci tati ons , grammar,
s pel l i ng, s yntax, or organi zati on
Submi s s i on has major errors
rel ated to ci tati ons , grammar,
s pel l i ng, s yntax, or organi zati on
that negati vel y i mpact
readabi l ity and arti culation of
mai n i deas
Submi s s i on has criti cal errors
rel ated to ci tati ons , grammar,
s pel l i ng, s yntax, or organi zati on
that prevent unders tandi ng of
i deas
10
Earned Total 100%
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