Case FIN501 Strategic Corporate Finance
Leverage, Capital, Structure and Divided Policy
Case Assignment
Part A: Quantitative Problems
- Suppose QuickCharge Corporation manufactures phone chargers. They sell their chargers for $20. Their fixed operating costs are $100,000 and their variable operating costs are $10 per charger. Currently they are selling 30,000 chargers per year.
- The StayDry Umbrella Corporation will have an EBIT of $100,000 if there is a normal amount of rain this year. But if there is a drought, they will have an EBIT of only $50,000. The interest rate on debt is 10%, and the tax rate is 35%. The company does not pay any preferred dividends.
Part B: Conceptual Questions
- For each of the following scenarios, explain whether the situation describes financial risk or business risk. Explain your answers to each scenario using at least one of the references from the background readings:
- Explain what capital structure theory (or theories) best describes the following situations. Make sure to cite at least one of the required textbook chapters for each answer, and to cite at least two references for this section:
Assignment Expectations
- Answer the assignment questions directly.
- Stay focused on the precise assignment questions. Do not go off on tangents or devote a lot of space to summarizing general background materials.
- For computational problems, make sure to show your work and explain your steps.
- For short answer/short essay questions, make sure to reference your sources of information with both a bibliography and in-text citations. Citation and reference style instructions are available at Trident University’s Introduction to APA Style, 7th edition .
***Please follow all instrutions for assignment. ***
