Hill Country Snack Food Co - Case Instructions

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Case instructions UPDATED Hill Country Snack Foods Co. The case assignment is due at 10:00 (sharp!) on October 18, 2013. Case reports should be dropped in the locked assignment box of the course, located in the second floor at Chydenia building. The case should be done in groups consisting of no more than three (3) students (no exceptions!). The maximum number of points from the case is 14. The best four cases will earn an additional 3 points. No case report should include more than 10 pages (including appendices showing the details for calculations, if any). Please place all important numerical results and figures in the text. All case reports should be 1.5 spaced with wide margins and use Times New Roman font 12. Co-operation in preparing answers to the cases between groups (or individuals not belonging to the same group) is prohibited. Case material can be collected in front of the instructor’s office. A spreadsheet supplement for case study is available at course webpage. Please answer the following questions (one by one) in your case report. Questions: 1. How much business risk does Hill Country face? How much financial risk would the company face at each of the three alternative debt-to-capital ratios presented in case Exhibit 4? How much value could Hill Country create for its shareholders at each of the three alternative debt levels? 2. What debt-to-capital structure would you recommend as optimal for Hill Country Snack Foods? What are the advantages of adding debt to the capital structure? How would issuing debt impact the company’s taxes and expected costs of financial distress? How would the financial markets react if the company increased its financial leverage? 3. How could Hill Country implement a more aggressive capital structure? What methods could be used to increase debt and decrease equity?

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