Sample Selection And Resource Of Data

We use Capital Asset Pricing Model (CAPM) approach to calculate the cost of equity. The formula of CAPM is re = rf + β × (E[RMkt] – rf).

The cost of equity was found using CAPM, with the given market risk premium of 5%, a beta of .88, and risk-free rate of 4.03%. The beta was found by running a regression of Southwest’s percent change in stock price versus the S&P 500’s percent change in stock price for two years (June 28, 2000 to June 28, 2002). The risk-free rate was the return on a ten-year treasury note issued on June 28, 2002, according to the U.S. Treasury’s website. The tax rate of 39% was used to account for tax savings from leverage. In order to calculate the firm’s leverage, the market value of equity was found from the price per share on July 24, 2002 (Yahoo Finance) and the shares outstanding on the balance sheet of the July 10-Q report, as shown in Exhibit X. The debt value was approximated at the book value since data could not be found regarding its market value. This analysis resulted in a debt weight of 11.74% and equity weight of 88.26%. The final approximation for the weighted average cost of capital was 8.64%.

I believe the thesis for Chapter 5, “The Audience,” of On Writing Well is “you are writing primarily to please yourself, and if you go about it with enjoyment you will also entertain the readers who are worth writing for (Zinsser 39).” According to the Bulldog Writing Center’s criteria, I believe this is a level 3 thesis sentence, because it has facts, examples, and a preview of analysis. The expected lesson from reading the essay is revealed, which is writers write for their own enjoyment.

In the Case of the Unknown Industries, we matched several industries with their corresponding balance sheets. We used several different methods to come up with our conclusion. An important factor we had to remember was the economic state industries were in their respective year.

a) Weighting of Capital Structure: Use of book values of capital rather than the market values

Generally, firms can choose among various capital structures in order to maximize overall market value of the company. It is proposed however, that

As much as market cap measures to what’s related to the company’s equity value, a firm’s decision based on its capital structure estimates more significantly to how the value of that company is allocated not only for the return on equity but accounting for debt as well. Most economists would refer to capital structure as the mix of a company’s long-term debt, the current portion of it, and of common and preferred stock. Furthermore, large tech-companies today have been taking advantage of capital structure optimizations as it is placed shoulder to shoulder to increasing return on equity thus lowering weighted average costs of capital for long-term investment. In other words, it is how a corporate manager should base his/her decisions on financing the company’s assets and operations through various growth prospects and forecast estimates. We will begin to further evaluate the composition of Google’s capital structure by focusing on the company’s key statistics and research data from the selected top online providers of financial statements, including Google!

Regression analysis seems to be extremely useful in determining financial distress and the bankruptcy of firms. In fact, in a particular study conducted by Bredart in 2014, it was presented that regression analysis was able to show an 84% prediction accuracy rate in determining bankruptcy of 870 firms between the years of 2000 and 2012 (Bredart, 2014). The independent variables used in Bredart study included profitability (net income/total assets), liquidity (current assets/current liabilities), and solvency (equity/total assets) while the dependent variable included financial distress.

For the analysis we have used the historical financial data of the company, the history of the company and its financing policy, and the financial data of its competitors.

The first research which is an empirical evaluation employs the process of evaluating an intervention. Therefore the focus is on the components of the SDP and evaluating the targeted outcomes of the program. In this study the progress of the targeted outcomes assessed in terms of tis its social security, food stamps and microcredit components. Based on empirical evidence the study details the assess of its components namely youth employment, provision of food stamps, provision of social insurance, forced & voluntary savings, credit schemes, social development initiatives and capital projects on local infrastructure. All these components are the structure of the SDP and research follow that same structure and assess the progress. The study uses three data sources; Sri Lanka Integrated Survey (SLIS), data acquired thru a Qualitative household survey on people’s perceptions and the third source is examination of government other reports on subject (Glinskaya, 2000). The empirical study used three main large scale standard data sources and coverage was large (in most components nationally) therefore the scope of the study is large and convincing. However evaluation is conducted by evaluating other resources in this method, therefore the level and quality of the resources used limits the quality of the research (Walter, 2006). Further the research was conducted 5 years after initiating the SDP. SDP is a mega scale national

Already in 1958, Modigliani and Miller have pointed the discussion of capital structure towards the cost of debt and equity. According to their first proposition, in a world of no corporate taxes and with perfect markets, financial leverage has no effect on a firm’s value. In their second proposition, they state that the cost of equity equals a linear function defined by the required return on assets and the cost of debt (Modigliani and Miller, 1958).

Besides, the sample is selected from 676 firms with at least 27 years, a total of 19,789 firm-years statistics. These data is selected by three standards, including long-term data (at least 27 years), positive book values and non-financial firms. By panel data techniques, the writers find that the AR (2) dynamic is poorer in explaining V_t when comparing with AR (1) dynamic. Meanwhile, the results indicate that both A (1) and AR (2) dynamics underestimate equity values, though the latter has a slight advantage.

The relationship between capital structure and firm value has been discussed frequently in the literature by different researcher accordingly, in both theoretical and empirical studies. It has also been discussed that whether the firm has any optimal capital structure that has been adopted by an individual firm, or whether the proportions of debt usage is completely irrelevant to the individual firm value.

Debt to equity (D/E) ratio is often used as an independent variable of audit pricing model to measure a firm’s capital

We use firm level data provided by Center for Monitoring Indian Economy PROWESS database. “Prowess is a database of active business entities for which some structured information related to their financial performance is available. It is only the largest and most comprehensive database on the financial performance of Indian business entities.” (CMIE) Annual reports of the companies containing information on income statements and balance sheet are one of the most important sources of data. The database covers manufacturing and service sector’s listed and unlisted large medium and small firms sector. It includes National Industrial Classification (NIC) two digit non-financial public and private limited manufacturing firms trading on