The purpose of the Final Project Research Paper is to examine capital structure theory, issues, and
debates, while showing how capital-structure choices affect a firm’s return on investment (ROI) and
its risk profile.
Your Assignment is to select a publicly held company and to analyze its capital-structure, applying the
theories and principles found in Chapter 15 of the text.The structure of your research paper should include:
• A preview of capital structure issues
• Business and financial risks related to capital-structure
• Modigliani andMiller’s [MM] capital-structure theory
• Criticisms of the MM model and assumptions
• Capital-structure evidence and implications
• Estimating the firm’s optimal capital-structure
A firm’s optimal capital-structure is that mix of debt and equity that maximizes the stock price. At any
point in time, management has a specific target capital structure in mind, presumably the optimal one,
though this target may change over time. For example, financial management may choose a 50%
equity financing [stock] and 50%debt [bond] financing.
Several factors influence a firms’ capital structure, including:
• Business risk
• Tax position
• The need for financial flexibility
• Managerial conservativeness
• Growth opportunities
Business risk is the riskiness inherent in the firm’s operations if it uses no debt.
Assignment Grading Rubric
Course: GB550 Unit: 5
Copyright Kaplan University
This report is intended to be a capital-structure analysis of your selected public company. Your paper is intended to be an executive summary of your analysis, and is limited to a minimum of 5 – 7 pages of text, excluding the title page, table of contents, graphs, charts, tables, etc.
This summary report of your selected company’s capital structure should convey the quality, depth, and completeness of your capital structure analysis, without going into excessive detail.
The report should adhere to APA format. A minimum of 4 reference sources are required in addition to the text.
Directions for Submitting the Final Project
Compose your research paper in a MSWord document and save it as Username-GB550 Final Project-Unit#.doc (Example: TAllen- GB550 Final Project-Unit 5.doc). Submit your file by selecting the Unit 5: Final Project Dropbox.
Criteria for Assigning Research AssignmentGrade
Provides a thorough discussion of the research topic especially as it relates to the course outcome “Evaluate the impact of financialmanagement practices on organizational decision-making.”
Analysis andCritical Thinking: The discussion clearly demonstrates knowledge of finance theory.
Writing Style andGrammar