Dick Smith Capital Structure
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Capital structure is the combination of debt capital and equity capital of the company. The mix of company’s long-term debt, short term debt, common equity and preferred equity. It is the structure of capital on how a firm finances its overall operations and growth by using different sources of funds. The capital structure of a firm determines how risky a company is by referring to the firm’s debt-to-equity ratio. A company having higher debt is considered risky.
Capital structure of DSH
Debt capital $89,204 34.52%
Equity capital $169,147 65.48%
Total capital $258,351 100% Above table shows the capital structure of net debt capital and equity capital of Dick Smith Holdings. The capital structure of the company is occupied
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Now, Cost of equity (Re) = 8.95% + 1.21×7.43% = 17.94% While determining the cost of debt we again used 8.95%,30 year U.S. Government Interest Rate given in Table B as the risk free rate plus 1.10% debt rate premium above Government rate, which is given in Table A. Cost of debt (Rd) = 8.95% + 1.10% =
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