Case Study: XYZ Company’s Capital Structure Decision XYZ Company is a medium-siz

Case Study: XYZ Company’s Capital Structure Decision
XYZ Company is a medium-siz

Case Study: XYZ Company’s Capital Structure Decision
XYZ Company is a medium-sized manufacturing company that is considering a new capital structure decision. The company is currently financed with 60% equity and 40% debt. The company is considering issuing an additional $10 million in debt to finance a new expansion project.
Questions:
What are the different types of capital that a company can use?
What are the advantages and disadvantages of using debt financing?
What are the advantages and disadvantages of using equity financing?
What are the potential risks of changing a company’s capital structure?
What is the weighted average cost of capital (WACC) for XYZ Company under its current capital structure?
What would be the WACC for XYZ Company if it issued an additional $10 million in debt?
What is the optimal capital structure for XYZ Company?
Additional Questions:
How can XYZ Company measure the cost of capital?
What factors should XYZ Company consider when making a capital structure decision?
How can XYZ Company mitigate the risks of its capital structure decision?

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