installment payments on your Describe briefly Intel's current capital framework. Discuss whether in your watch this capital structure is optimal for Intel, with particular emphasis on the pros and cons of Intel's substantial cash loge. Articulate and defend a " targetвЂќ capital framework for Intel. Cee
While shown inside the financial profits statement (Exhibit3), Intel Corp. (INTC) includes a capital structure consisting most of equity. Intel has hardly any debt in its capital framework and the expense of debt may have only a marginal impact on the overall expense of capital. The current capital structure of Intel is not optimal however since maximum capital structure is producing minimum weighted-average cost of capital.
Percentage of Equity and Debt:
Long-term debt = 363 = 363/4781 = 7. 59%
Common Value =4418 sama dengan 4418/4781 = 92. 4 %
Cost of Capital:
Expense of debt =interest expense/long term debt sama dengan 29%
Cost of Value =
Since Intel offers very large cash balances ($2. 4billion), Intel can decrease WACC through the use of cash payment through the pursuing alternative.
1 . ) Industry repurchase software
2 . ) Concern put cause
The moment firm repurchases stock, it will reduce amount of shareholder. Therefore it will reduce common equity amount in B/S.
Due to the fact that cost of equity is higher than cost of financial debt ( you may need to show the calculation ), Therefore , if the amount of collateral is decreased, it will certainly reduce in WACC.
Providing the set warrant will have the same end result as re purchasing inventory, but you will see the risk that company are unable to buy share back in the event Intel cost is higher then this exercise selling price by following two years. Because one who possessing put bring about will not find any advantage for exercising warrant ( Not sure em for this review, but you can show the stock value trend to get Intel to state something like Howdy. )
but you can demonstrate stock cost trend intended for Intel to talk about something like Hi there.. SEE... to get trend in next 2 yrs...