Corporate Finance Essay Example | Topics and Well Written Essays - 500 words - 6

Corporate Finance - Essay Example collect to recessionary conditions and down side of economy, there is no immediate chance of recovery. Accordingly, Qantas Airways, which has leveraged beta of 1.25 is certainly a more attempty comp both comp ard to any other company in the table.Above table suggests that argument risks associated argon lowest with Telstra Corp. and Coca Cola companies for having lowest beta of 0.16 and 0.15 respectively. Highest business risks are associated with BHP Billiton and Rio Tinto with beta of 0.52 and 0.43 respectively. As table indicates for the companies where finance risks are low (like CSL and BHP Billiton), business risk is high and the companies with high finance risk (like Coca-Cola and Telstra), business risk is low. Thus when we compare business risk with finance risk, we find that both are not consistent.Further, comparing the figures of shareholders return of BHP Billiton and Coca Cola, we find that both have accustomed almost same returns ho wever, there is a vast deflection between their business risks and financial risks profiles. Obviously, they are following Modigliani and Miller theorem that prize of the companies are independent of its capital structure.3. BHP Billiton and Rio Tinto though belong to the same exertion sector they have vastly different debt- righteousness ratios. Rio Tinto is a high leveraged company and its return on equity in percentage terms is less than that of BHP Billiton, which indicates that servicing cost of debt lowers down the percentage return on equity. In other words we can say that higher leveraging does not bring any additional return to the equity holders.Total shareholders return too in chemise of Rio Tinto is only slightly less compared to that of BHP Billitons shareholders return. Despite large percentage difference in return on equity, there is not a proportionate difference on the value of total shareholders return.In short, above set of Australian companies do not seem to