Blattner industries, an established producer of printing equipment,expects its sales to remain flat for the next 3 to 5 years because of both aweak economic outlook and an expectation of little new printing technologydevelopment over that period. On the basis of this scenario, the firm’s managementhas been instructed by its board to institute programs that will allow it tooperate more efficiently, earn higher profits, and, most important, maximizeshare value. In this regard, the firm’s chief financial officer (CFO), Jon Lawson,has been charged with evaluating the firm’s capital structure. Lawson believesthat the current capital structure, which contains 10% debt and 90% equity, maylack adequate financial leverage. To evaluate the firm’s capital structure, Lawsonhas gathered the data summarized in the following table on the current capitalstructure (10% debt ratio) and two alternative capital structures—A (30% debtratio) and B (50% debt ratio)—that he would like to consider.
This is the end of the preview.
access the rest of the document.
Financial Ratio, current capital structure, Jon Lawson