You should discuss the implications of the various capital structure theories for optimal capital structure as they apply to your assigned company including:
o Trade-off theory
The trade-off between tax benefits of debt (including personal taxes and dividend imputation credits (see Topic 7)) and the financial distress costs.
Keep the general discussion of the trade-off theory very short (not more than half a page).
Analysis of tax benefits should be detailed.
Tax benefit analysis needs to address Australia’s dividend imputation tax system.
The implications of the trade-off theory determinants (see Topic 5) of optimal leverage for the optimal leverage of the firm.
The report should have separate sub-sections for each of the following determinants: Profitability, Uncertainty of Operating Income, Growth Opportunities and Types of Assets.
Analyses of the determinants should be both qualitative and quantitative.
You may incorporate stakeholder theory and agency theory
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