Thesis on Capital Structure

Economic development can be defined generally as involving an improvement in economic welfare, measured using a variety of indices, such as the Human Development Index (HDI). A developing country is described as a nation with a lower standard of living, underdeveloped industrial base, and a low HDI relative to other countries. There are several factors which may have the effect of limiting economic development in such countries. Factors such as these include: primary product dependency, the savings gap and political instability.

To answer the question, “What is economic development?”Dr. Grinols professor of economics at Baylor University and author of Gambling in America: cost and benefits, 2004 said, “When individuals undertake productive activity, they engage in the creation of goods and service that provide greater welfare or satisfaction than the inputs used.” (Grinols 2004). Economic development is the creation of greater value by society from its available resources which means greater income and wealth, which lead to greater utility for members of society (Grinols 2004). Dr. Grinols

The social, economic, geographical and environmental context of Nepal with particular reference to hill villages using Sandikhola as a case study

Economic development can be defined generally as involving an improvement in economic welfare, measured using a variety of indices, such as the Human Development Index (HDI). A developing country is described as a nation with a lower standard of living, underdeveloped industrial base, and a low HDI relative to other countries. There are several factors which may have the effect of limiting economic development in such countries. Factors such as these include: primary product dependency, the savings gap and political instability.

E. I. du Pont de Nemours is an American chemical company that has recently acquired the major oil company of Conoco Inc. and is becoming one of the largest chemical manufacturers in the United States. Its financial conservatism has pushed Du Pont to the forefront of the industry as its profitability soared, providing it with the liquidity to readily finance its cash needs. But several competitive conditions posed a challenge to its risk averse financial policy as the 1970's was characteristic of a declining level of industry demand and price, along with rising fuel prices and an economic recession. These pressures now force Du Pont to source its financing through debt, foregoing its risk averse

No R&D: Since the airline doesn’t make its own aircraft, it doesn’t incur any R&D expense of its own.

Finance: Evidence from the Field” in the Journal of Financial Economics Vol. 60, 2001, pp. 187-243.

Healthy capital formation in the health care industry is crucial for organizations to achieve their long-term objectives (Cleverley, Cleverly & Song, 2010). Long-term projects require large investments and cash outlay, which precedes the receipt of cash inflow in future time (Finkler, Calabrese and Ward, 2011). Therefore, organizations tend to predict profitability by evaluating if the long-term projects expected return is great enough to justify the risk (Finkler et al., 2011). This analysis or evaluation is capital budgeting (Finkler et al., 2011). There are three approaches to assess capital budgeting, the payback method, the net value method and the internal rate of return method (Finkler et al., 2011). To understand net value and internal rate of return, acknowledgement of the time value of money is necessary (Finkler et al., 2011). However, the money needed to make these investments needs to come from somewhere. This money is referred to as capital (Finkler et al., 2011). The dominant sources of capital are stock issuance, or charitable donations (equity financing) or loans (debt financing) (Finkler et al., 2011). The choices (equity or debt) made respect to obtaining resources determines the capital structure of the organization (Finkler et al., 2011). A successful capital structure maintains the cost of capital low (Finkler et al., 2011). The cost of capital is the weighted average of the cost common stock, preferred

Ex-Post Cost of Borrowing. Exhibit 14.2 in the text shows that Deutsche Bank borrowed funds at a nominal cost of 9.59% per annum, but at a later date that debt was selling to yield 7.24%. Near the other extreme, the Kingdom of Thailand borrowed funds at a nominal cost of 8.70% but after the fact found the debt was sold in the market at a yield of 11.87%. What caused the changes, in this case in opposite directions, and what might management do to benefit (as Deutsche Bank did) rather than suffer (as the Kingdom of Thailand did)?

What do you think about the capital structure policies Diageo has pursued in the past. Do they make sense? How does it compare to Diageo’s competitors’ policies? Which competitors would make for the best comparison? (40%)

Does the capital structure of a firm really matter? If so, how and why does it matter? Practitioners and scholars of corporate finance have debated these questions for several years and have found it difficult to come up with definitive answers. The classical work of Modigliani and Miller (1958) provided the impetus for what is now, orthodox corporate finance theory on the optimal capital structure of firms. They postulated that, in a perfect or frictionless capital market, the choice between debt and equity financing has no material effect on the value of the firm. Stern and Chew (2003) noted that following the Modigliani-Miller propositions, academic researchers in the 1960s and 1970s turned their attention to market imperfections

Diageo was formed in 1997 through the merger of two consumer product companies Grand Metropolitan plc and Guinness plc under the strategy of reducing costs through marketing synergies, cutting overhead expenses and increasing production and purchasing efficiencies. The new merger wanted to concentrate solely on the beverage alcohol business, so it sold its packaged foods (Pillsbury) and fast food (Burger King) businesses. While the mandate for Managing for Value came from the highest levels of Diageo, the treasury team was given the task of establishing the cost of capital for each of the different areas the company operated. The team had to create a simulation model which should consider new finance

Development is a broad concept that includes social, economic, political and human aspects. Human development consists of the foundation on which the first three aspects .According to Burkey (1993: 38), economic and political development should be translated into social development. As development is a broad concept, it has been extensively explored with a view to realize that economic growth and social development. However, the emphasis moved from industrial and economic development as the factors that determine societal transformations. Economic growth may bring material gain to the people, but development is about enrichment of the lives of the people in the society Edwards (1993:80) this means that development is much more important to a country than economic growth only because when people are not empowered and developed it takes us back to the theory of development which explains that empowerment and

Banks fail when they are no longer able to meet their obligations. They might be unable to pay the bills, or a bank failure may arise because they can 't provide cash when depositors demand it.  Nepal Development Bank Limited (NDBL) which aspired to enter the new millennium with profitability, size and efficiency on par with the best of the banks in the world is one of the banks that have been a victim of its own irresponsible acts. One factor behind the misfortune of Nepal Development Bank Limited is bad corporate governance. Economists say corporate governance has appeared as the biggest challenge for the banking sector. According to them, the easy licensing policy adopted over the last decade is the main reason behind today’s problems, as everybody with certain income could open BFIs.

placid activity. There were not many important financial decisions to be made for the simple