Capital structure and financial risk

After reading about and practicing with some of the concepts found in your chapter reading, you now apply what you have learned to a question and a problem. This assignment addresses how to maximize shareholders value and how a company chooses the amount of debt to use in its capital structure. Prepare this assignment as a Word document. List each question followed by your answer. Complete questions: Define each of the following terms: Operating plan; financial plan Spontaneous liabilities; profit margin; payout ratio Additional funds needed (AFN); AFN equation; capital intensity ratio; self-supporting growth rate Forecasted financial statement approach using percentage of sales Excess capacity; lumpy assets; economies of scale Full capacity sales; target fixed assets to sales ratio; required level of fixed assets Complete problem: Premium for Financial Risk XYZ, Inc. has an unlevered beta of 1.0. They are financed with 50% debt and has a levered beta of 1.6. If the risk-free rate is 5.5% and the market risk premium is 6%, how much is the additional premium that XYZ, Inc. shareholders require to be compensated for financial risk? Show your work. Prepare this Assignment as a Word document. List each question, followed by your answer.