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

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