Question: Hello, I really need help with my assignment. About the following question, I don't know the way to find sources. Please help me with that,
Hello, I really need help with my assignment. About the following question, I don't know the way to find sources. Please help me with that, the company name is Constellation Software Inc.
What is the company's capital structure? How much debt should the company use in financing? Is there scope for increasing value by changing the capital structure? What is the company's dividend policy? Is there scope for increasing value by changing the policy?
General
- What are the different kinds of financing that this company has used to raise funds? Where do they fall in the continuum between debt and equity?
- Does management have a target capital structure? If so, how is justified? How is it maintained?
- Does the firm have too much or too little debt? Attempt to estimate the optimal debt ratio for the firm. You will need to make assumptions. You may consider using qualitative or quantitative analysis, or any combination.
Qualitative Analysis
- How large, in qualitative or quantitative terms, are the advantages and disadvantages to this company from using debt? Consider for your firm: the potential benefits of additional debt (e.g. tax benefits); the potential for costs of financial distress; the potential for agency costs; the benefits of using debt as a disciplinary mechanism; and, the costs of information asymmetry.
- Would you expect your company to have a high or a low debt ratio? Does the company's current debt ratio match your expectations?
Cost of Capital Approach
- What is the current cost of capital for the firm?
- What happens to the cost of capital if the debt ratio is changed? (make assumptions)
- At what debt ratio is the cost of capital minimized and firm value maximized?
Relative Analysis
- Relative to the sector to which this firm belongs, does it have too much or too little in debt?
- Relative to the rest of the firms in the market, does it have too much or too little in debt?
Dividend Policy
- How much has this company paid in dividends over the last few years? How much stock has this company bought back over the last few years?
- How much cash available for equity holders has the firm generated over the past few years? How much has it actually returned to equity holders? How much cash does the firm currently have available?
- How well has management done at choosing investments? Does the firm appear to have good investments available?
- How does the firm's dividend policy compare to firms in its sector? Firms in the market
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