A Capital Structure Analysis for Addus HomeCare Corporation

Donglai Yang

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.FINANCE

Faculty Research Mentor: Andreas Kakolyris  

Abstract:

This study examines the optimal capital structure by simulating the weighted average cost of capital. We analyze how changes in levered beta influence the market value and optimal capital structure of Addus HomeCare Corporation (ADUS). As a leading provider of non-medical home care services, ADUS has been operating for over 40 years and has been publicly traded since 2006. Our model applies the synthetic rating approach to evaluate capital sensitivities under hypothetical alternative leverages by using Bloomberg Terminal data. Prior literature suggests that variations in beta resulting from changes in leverage or other risk factors do not significantly alter the overall cost of capital. To test this proposition, we examine a U.S. firm listed in the S&P SmallCap 600 with a market capitalization exceeding $2 billion in the healthcare sector. Capital structure and its impact on firm value and cost of capital remain widely debated topics, as they are closely tied to strategic financial restructuring decisions. The findings of this analysis are presented and discussed in this poster.