Capital Structure

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Capital Structure


For this assignment, I have chosen Apple Inc. to analyze its capital structure. It discusses the Modigliani and Miller's [MM] capital structure theory. Miller and Mongolian (1958) explained that firm's value didn't vary by any change occurred in the capital structure. Total cash flows Firms build for investors unaffected despite the consequences of capital structure.

Weighted average cost of capital (WACC) depending on cost of equity and cost of debt and also market value ratios of equity and debt to firm value. The net of tax approach encouraged the firms to utilize 100 percent debt in debt-equity combination. Firms build total cash flows for all investors were unchanged despite the consequences of firm financing. MM argue if worth of the firm depends on capital structure; which may be resulted in arbitrage opportunity in the perfect capital market. Determining your corporation's capital structure is done by calculating the percentage of the total funding that each component represents. Debt financing is the most costly source of capital versus equity. This paper also highlights the firm's optimal structure. A firm's optimal capital structure is that mix of debt and equity that maximizes the stock price. For example, financial management may choose a 50% equity financing [stock] and 50% debt [bond] financing. A business firm's capital structure may also depend upon the enterprise's current growth stage.

Capital Structure


For this assignment, I have chosen Apple Inc. to analyze its capital structure. Apple Inc. is an American multinational corporation that develops and manufactures consumer electronics, software and personal computers. Apple has about 35,000 employees worldwide and around the world had annual sales of 42.91 billion.

It all started in California with two young men, Steve Jobs and Steve Wozniak. They start shyly with minimal way: through hard work, they assemble around two hundred machines which allowed the Apple to be born: 1 April 1976 in Cupertino with the Apple. In January 1977, the company "Apple Computer" really sees the day and began to speak of her with the "Apple II". Truly public oriented, micro-computer attracts many consumers and will sell until 1986. Only at the output of the microphone that the company decides to give an apple as a logo to mark it's previously represented by a picture of Isaac Newton lying under a tree, receiving an apple on his head. In 1978, Apple released the floppy drive!

In 1980, the Apple III had a massive flop because of considerable technical problems. But the American multinational has more than one trick up his sleeve and will recover from his flop in 1984 with the first Macintosh that experienced a real world success. This success was followed by many other families with different software and products like the iPod, iPhone or iPad and operating systems to the attention of both business and consumer public.

A preview of capital structure issues and other issues of the Apple Inc. are also highlighted in this paper. It also discusses the Modigliani and Miller's [MM] capital structure ...
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