FIN501 - Strategic Corporate Finance

Module 4 - SLP

The Capital Structure Decision and the Cost of Capital

[Name of Instructor]

FIN501 - Strategic Corporate Finance

Module 4 - SLP

The Capital Structure Decision and the Cost of Capital

LOCKHEED MARTIN CORPORATION

Introduction

Lockheed Martin Corporation is a worldwide security and aviation group essentially engaged in the manufacture, research, development, design, integration, and sustainment of engineering products and systems. The company additionally provides a wide range of engineering, management, technical, logistic, information and scientific services. It serves both global and domestic clients with units and aids that have resistance, common, and business provisions, with its essential clients being firms of the United States Government. It manages in four sections: Electronic Systems, Aeronautics, Global Solutions, Space Systems, and Information Systems (www.lockheedmartin.com).

Purpose

The purpose of this study is to find out the effect of capital structure over the company. Capital structure is a combination of equity and debt or a combination of fixed income securities and variable income securities. The capital structure plays an important role in determining the future actions and position of any company and it is also important in getting finances and investments for the company.

Mostly, the financial indicators of an organization, for example debt ratio and shareholder equity, are arranged as being pointers of either market value or book value. Researchers ordinarily measure capital structure utilizing debt ratios. Titman and Wessels (1988) recognized a critical correspondence amidst the market and the book values of debt for indistinguishable periods along these lines, in case the market value or the book value is utilized as the pointer of debt value is immaterial. Baskin (1989) accepted that book value might reflect interest for collected financing. Besides, Micheal and Wesley (1979) believed that the book value of debt ratio would be able to reflect exact firm dependence on debt.

Balance Sheet and Market Value ...