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Convert the octal (base-8) value 234 to its decimal equivalent.  ๑(◕‿◕)๑  

Tito’s Tacos is considering opening a new location in a town where it currently has one other location.  The sales at the other location are $770,000 annually.  The new location is expected to generate sales of $650,000 in the first year with 6% sales growth per year for the next 5 years.  Cost of goods sold are expected to be 33% of sales.  The new location will be built on land costing $125,000 and construction costs for the building will be $205,000.  Assume that Tito’s requires an initial inventory of $17,875 and cash on hand of $1,850.  Tito’s will also have to pay $500 for necessary licenses and permits before being allowed to open.  What is the expected cash outflow in Year 0 (aka the initial outlays) for the new location?

Adding debt to the capital structure will cause Net Income to fall by the amount of the interest expense.

If the Treasury yield curve is downward sloping then:

Adding debt to the capital structure will cause EBIT to fall by the amount of the Interest Expense.

Recalling the Hill Country Snack Foods case, in order to calculate the Cash Payments to Securityholders, you should add together the Interest Expense and the Dividend Payments.

Adding debt to the capital structure will cause Net Income to fall by the amount of the Interest Expense times (1 – T) where T is the firm’s tax rate.

High levels of debt lead to higher costs of debt (borrowing costs) but typically do not affect the cost of equity.

If a firm changes its capital structure in such a way that the firm now has relatively more debt and less equity than it did before, but the change is not large enough to affect the required returns on the debt or on the equity, the firm’s weighted average cost of capital should increase.

According to the trade-off theory of capital structure, the optimal capital structure is found by balancing the additional gains from leverage against the added costs from financial distress.