FIN501 MOD4 SLP4-The Capital Structure Decision and the Cost of Capital

FIN501 MOD4 SLP4-The Capital Structure Decision and the Cost of Capital

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The Capital Structure Decision and the Cost of Capital TUI University January 7, 2012 The Capital Structure Decision and the Cost of Capital The purpose of this essay is to review Visa’s liabilities and equity and compare Visa’s debt ratio with a couple of its main competitors and offer recommendations concerning the statistical evaluations. According to Visa’s 2011 balance sheet (Yahoo! Finance, 2011), the following calculations were reported concerning the company’s long- and short-term liabilities: Visa (as of September 30, 2011) Total Liabilities Total Assets Visa (Long- Term) $8,323,000 $34,760,000 (YCharts, 2012) Visa (Current) $3,451,000 $9,190,000 (YCharts, 2012) Visa (Long - Short) $4,872,000 $25,570,000 (YCharts, 2012) Visa Market Value
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To calculate Visa’s market value, outstanding shares have to be multiplied by the market price per share as follows: Visa Shares Outstanding: $1.19B (Yahoo! Finance, 2012) Market Price/Share: $100.71 as of January 7, 2012 (Yahoo! Finance, 2012) Market Value: $1.19 X 100.71 = $119.85B Debt Ratio As of September 30, 2011, Visa, Inc. (V) had total liabilities (in millions) of $9,190.00 (balance sheet) and total assets of $34,760.00 (balance sheet). By dividing the company's total liabilities into its total assets, Visa maintains a high percentage of leverage as measured by the debt ratio (Richard Loth, 2011).
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