ACCT1063: How does a firm’s chosen capital structure affect the firm value: Managerial Advisory Finance Report, RMIT, Singapore, Singapore

Required:

Hint: Use the following assumptions when answering the above question.

• • How does a firm’s chosen capital structure affect the firm value?
    • Why is capital structure analysis useful for a company? (Discuss the optimal capital structure, firm value, and y higher EPS does not always support the optimal capital structure).
      • • Explain the three types of leverage. What do higher values of each type of leverage mean in terms of profitability potential and risk?
        • Using the Two Years Percentage Change method, calculate Airbnb’s  DOL, DFL and DTL results for each year from 2020 to 2022. (Note: you can get data for 2019 from the 2020 annual report).
        • Explain how Airbnb has been able to reduce their costs using one structural cost driver and one executional cost driver.
      • Analysis of company’s capital structure policies (4+4+14+3= 25 marks)