For GB550 Unit 9, the capital structure decision favors a 55-to-35 split of new debt and new shares once a drought year is tested against the lender's covenant. Searches like "gb 550 unit 9 assignment example", "gb550 unit 9 sample" and "gb550 unit 9 example" land here.
What a finished GB550 Unit 9 capital structure decision looks like
About six pages built on three tables. The first computes earnings per share at an expected EBIT of 95.7 million: 1.749 dollars with all debt at 6.4 percent, 1.660 with 4.16 million new shares sold at 22.80 less 5 percent costs, and 1.711 with 55 million of debt and 35 million of shares. Debt wins whenever EBIT exceeds 69.7 million. The second table replays a low-water year with EBIT of 61.0 million and EBITDA of 132.0: coverage falls to 2.01 times under all debt, and debt reaches 3.86 times EBITDA against a 3.75 covenant, while the split holds at 3.60. The third shows market debt ratios of 43.3, 35.5 and 40.3 percent. The paper recommends the split and a target near 40 percent debt.
How a GB550 Unit 9 example is structured
The decision is framed around the firm's circumstances before any theory appears: a fleet business with heavy, resalable assets, earnings exposed to river levels, and a bank covenant on leverage. A short theory section names the tradeoff between the tax deduction on interest and the costs of financial strain, and states which parts of it the analysis can measure. The EPS table follows, with the indifference EBIT solved algebraically. A stress section then asks what each option does in a bad year rather than an average one, using the firm's own low-water history. The market-ratio table connects the choice to the 38.5 percent debt weight used in the weighted rate from Unit 6. Discussion weighs tax shield value, 21.6 million under all debt against 13.2 under the split, against covenant risk. A recommendation with a target ratio and one revisiting condition closes the paper.
Circumstances before theory
River-level exposure, resalable barges and a 3.75-times leverage covenant are set out first, because each shapes how much borrowing this firm can carry.
Solving for indifference
Setting the two earnings-per-share equations equal gives an EBIT of 69.7 million, well under the 95.7 expected, which is why debt looks attractive at first.
A drought year, replayed
At 61.0 million of EBIT, all-debt financing breaches the covenant at 3.86 times, while the split stays under at 3.60.
Shield against strain
Added interest deductions worth about 21.6 million under all debt, against 13.2 million under the split, are weighed against the chance of a covenant breach.
A target, not a slogan
The paper sets a market debt ratio near 40 percent and names a second low-water year as the condition for revisiting it.
Where marks go in GB550 Unit 9
Theory recited without a number is the pattern that most weakens capital structure decisions: two pages on Modigliani and Miller and the tradeoff model, and no ratio chosen for this firm. EPS comparisons made only at expected EBIT, with no indifference point and no bad year, show the upside of leverage and hide its cost. Stress tests using an arbitrary decline rather than the firm's own history of low water read as guesswork. Ignoring covenants, when the case supplies one, misses the constraint that usually decides the question. Share issues priced without flotation costs understate dilution. Papers that recommend debt or equity without linking the choice back to the cost of capital weights miss the thread the course has built since the risk unit. A target ratio with no condition for revisiting it suggests the analysis stopped early.
Get a GB550 Unit 9 example written to your instructions
Which firm does your Unit 9 case describe, and what financing need does it set? Send those figures, any covenant terms, the prompt and the rubric. Each funding option comes back compared at expected and stressed earnings, with a target ratio argued for that firm. Nothing is billed for the opening custom sample, and 24-48h is the usual wait.
GB550 Unit 9 questions, answered
What is the EBIT-EPS indifference point?
The level of operating income at which two financing plans leave shareholders with equal earnings per share. Beyond that point, the plan with more debt yields higher EPS because fixed interest is spread over fewer shares; below it, the equity plan wins. The sample solves for 69.7 million and then asks how likely EBIT is to fall that low, which is the question that matters.
Why does a covenant carry so much weight in the decision?
Because breaching one can let lenders demand repayment or reprice the loan at the worst moment, when earnings are already weak. A plan that looks best on average but trips a covenant in a plausible bad year carries a cost EPS tables never show. The sample tests each option against the firm's own drought history for that reason.
Does the target ratio have to match the industry?
Not exactly, but a figure far from peers needs a reason. Barge operators hold resalable assets and fairly steady contracts, which supports moderate borrowing, while river-level risk limits it. The sample sets about 40 percent of market value and explains both pressures. The custom version compares your firm with whatever peer data your section provides or accepts.