Submitted by blkhart2 on February 4, 2008

• Category: Business
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Determining The Debt-Equity Mix

Determining the Debt-Equity Mix
The first scenario was to observe how the cost of debt and equity proportions changed and how the Weighted Average Cost of Capital (WACC) changed as the debt-equity mix changed. The objective was to decide the correct proportion of debt and equity in the capital structure to allow the company to move forward on its plan to expand. The proper debt to equity mix will keep the WACC low.
The zero taxes and low interest rate loans being offered to small businesses made debt over equity more attractive then Uncle Jorge’s increased stake in the operations of the business. By configuring a capital structure with a 70 percent debt, and 30 percent...

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