Description
750 - 1000 words
2 reference in APA format with in text citations.
Course Scenario & Additional Financial Information attached.
Assignment Scenario Below:
Respond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas.
Mary Francis has just returned to her office after attending preliminary discussions with investment bankers. Her last meeting regarding the intended capital structure of Apix went well, and she calls you into her office to discuss the next steps.
“We will need to determine the required return for our intended project so that we have a decision criteria defined for the project,” she says.
“Do you have the information I need to describe capital structure and to calculate the weighted average cost of capital (WACC)?” you ask.
“I do,” she smiles. “We can determine the target WACC for Apix Printing Inc., given these assumptions,” she says as she hands you a piece of paper that says the following:“Great,” you say. “Thanks.”
- Weights of 40% debt and 60% common equity (no preferred equity)
- A 35% tax rate
- Cost of debt is 8%
- Beta of the company is 1.5
- Risk-free rate is 2%
- Return on the market is 11%
“Be sure to indicate how these costs of capital might be used to determine the feasibility of the capital project,” Mary says. “I want your recommendation about which is more appropriate to apply to project evaluation, too. Let me know what you think.”
“One more thing,” she says as she stands up to signal the end of the meeting. “You did a good job with the explanations that you provided Luke the other day. Would you have time to define marginal cost of capital for me so I can include it in my discussions with investors? You seem to have a knack for making things accessible to nonfinancial folks.”
“No problem,” you say. “I’m glad my explanations are so useful!”
For this assignment, complete the following:
- Describe capital structure.
- Determine the WACC given the above assumptions.
- Indicate how these might be useful to determine the feasibility of the capital project.
- Recommend which is more appropriate to apply to project evaluation.
- Define marginal cost of capital.
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Explanation & Answer

Attached.
Running head: CAPITAL STRUCTURE
CAPITAL STRUCTURE
Name
Institution
Date
2
CAPITAL STRUCTURE
Capital Structure
The capital structure of an organization comprises the combination of the economic debt,
the value or the multiple investments the organization undertakes (Core, Hail & Verdi, 2015). A
firm’s capital framework does consist of the liability structure. For instance, an organization that
provides a $60 billion from economic debts and $30 billion in value it can be concluded that
economic debt funding which is higher than the equity financing, a larger percentage of the
company control will be based on economic debt. From the illustration provided the concept of
the industrial framework has been displayed in the main town industry (Robb & Robinson,
2014). The gearing ratio of the company is mainly employed from outside where the business is
funded from outside sources (Frank, & Shen, 2016). For example, the manager taking out
temporary loans
Depending on the complexity of an organization capital structure there may bedi...
