Business Finance Homework Help

I’m working on a data analytics case study and need an explanation and answer to help me learn.

1. Determine whether the following statements by Sara Brown about efficient market hypothesis are correct or incorrect:

a. Statement 1

b. Statement 2

c. Statement 3

d. Statement 4

e. Statement 5

2. What different types of information are assumed to reflect in the company’s stock price? Explain the different types of information under each form of market efficiency as stated by Mr. Goldreich.

3. An individual investor, Ms. Brenda Biswa wants to invest in Angelina corporation. She has gathered data on the company from the current issue of the company’s annual financial report, newspapers, and press release of the capital investment project. Assuming the market is semi-strong efficient, can Ms. Biswa earn above-average returns using this material public information? Explain.

4. Ms. Brenda Biswa is consulting with her financial advisor, Paul Marsh. Paul believes that new information does not quickly get to all investors and that it takes time to analyze and act on new information. He tells Ms. Biswa that investors are not rational, deviations from rationality are similar across investors, and arbitrage, although costly, cannot eliminate inefficiencies. Does Paul Marsh believe in market efficiency? Explain why.

5. Explain how behavioral biases of overconfidence, regret, representativeness, and familiarity can affect investment behavior of investors of Angelina Corporation.

6. The board is meeting to discuss its capital structure. Explain the basic goal of financial management with regard to capital structure to the board of Angelina Corporation.

7. Angelina Corporation wants to determine the optimal capital structure that will maximize the value of the company by restructuring its finances. The original capital structure has no debt with a firm value of $1,000,000 (in millions) and the four possibilities under the new capital structure are presented below:

	No debt	Proposed	Proposed	Proposed	Proposed
	(Original structure $000)	restructuring 1	restructuring 2	restructuring 3	restructuring 4
Debt	0	500,000	400,000	300,000	200,000
Equity	1,000,000	650,000	850,000	800,000	830,000
Firm value	1,000,000	1,150,000	1,250,000	1,100,000	1,030,000
Percentage of debt	0	43.48	32.00	27.27	19.42
Percentage of equity	100	56.52	68.00	72.73	80.58
Return to shareholders after restructuring	4.80%	10.10%	13.60%	6.10%	5.12%
Weighted average cost of capital (WACC)	15.80	9.50	9.30	10.20	14.50

Base only on the information in the table, should Angelina Corporation restructure the firm? Explain. If yes, which proposed capital structure do you recommend for Angelina Corporation and why?