To examine Telstra's current financing choices and to categorize them into debt (borrowings) and equity and to examine the tradeoff between debt and equity for your firm.

Assessing Current Financing 

• Based on Dickison (TAR, 2011), what is the firm's stage in the firm's life cycle? 

• Based on the growth stage of the firm, should the firm have high or low leverage? 

Benefits of debt (compare with competitor) 

• Tax benefit: What marginal tax rate does this firm face, and how does this measure up to the marginal tax rates of other firms? 

• Added discipline: Did this company have positive Jensen's alpha? What is the managerial ownership? 

Costs of Debt 

• Expected bankruptcy: What is the interest coverage ratio?

• What is the bond rating, if any? 

 • Agency cost - what is the firm's price-to book ratio, versus its competitor's? • Loss of flexibility: What is the (capexdepr)/sales ratio versus its competitor's?

Answer rating: 100% (QA)

Assessing Current Financing Based on Dickison TAR 2011 what is the firms stage in the firms life cycle Dickinson TAR 2011 suggests that the life cycle stages of a firm are introduction growth maturity ... View the full answer