TARGET CAPITAL

STRUCTURE
DELOS SANTOS, QUENNIE
LLAMADO, CHRISTINE MARIE R.
MACA, ELIGO JOHN G..
MEDINA, KATHLEEN JANE NORA C.

INTRODUCTION
La

Salle Corp. is a U.S. based MNC with

subsidiaries in various less developed
countries were stock markets are not
established.

STATEMENT OF THE PROBLEM

How

can La Salle Corp. still achieve its

global target capital structure of 50% debt
and 50% equity if it plans to use only debt
financing for the subsidiaries in these
countries.

List of Least Developed

Countries (LDCs)
Ethiopia

Gambia

Lesotho

Liberia

Madagascar

Mali

Mauritania

Mozambique

Rwanda

Sao Tome and

Principe

Senegal

Guinea

Debt Financing meanswhen a firm raises money for working

capital or capital expenditures by selling bonds, bills, or notes
to individual and/or institutional investors. In return for
lending the money, the individuals or institutions become
creditors and receive a promise to repay principal and interest
on thedebt.

Equity financingis the method of raising capital by selling

company stock to investors. In return for the investment, the
shareholders receive ownership interests in the company.

SWOT ANALYSIS

STRENGHTS
Maintain

WEAKNESSES
Paying

back the debt

OPPORTUNITIES
Tax

deductible

Lower

ownership of the business

interest rates

THREATS
Cash

flow difficulties

High

interests rates

ALTERNATIVE COURSES OF ACTIONS

Managers should choose the capital structure that maximizes

shareholders wealth. They should consider the capital structure based
on the market values of debt and equity.

La Salle Corp. may use debt restructuring. They may negotiate with
the creditor certain concessions for modifications of debt terms.

La Salle Corp. may use equity swap which means the payment to
settle debt is in form of shares of the companys stocks.

ADVANTAGES OF DEBT FINANCING

Debt financing can be used to fund just about any kind (or size) of
business.

Lenders of debt financing dont have any say I how you run your own
business.

DISADVANTAGES OF DEBT FINANCING

Debt repayment

Debt has to repaid every month, regardless of how well a business is

doing (that means that if your sales takes a dip, you may find yourself
unable to make your monthly loan payment.)

RECOMMENDATIONS and CONCLUSIONS

La Salle can combine together debt financing of its subsidiaries to make the
firm secure its global target capital structure is balance. The larger emphasis
on equity financing in the U.S. offsets the larger emphasis on debt financing
in the foreign countries.