An Analysis of Capital Structure and Firm Value: Evidence from Thermo Fisher Scientific

Jinghao Weng

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.FINANCE

Faculty Research Mentor: Kakolyris, Andreas  

Abstract:

The research aims to analyze how capital structure of Thermo Fisher influences its weighted average cost of capital (WACC) and the value of company. Thermo Fisher is a global leader which focuses on life science. It is a large-scale company with stable operations, making it a suitable company for financial analysis. This research focuses on the changes in the company’s cost pf capital under different debt ratios through a weighted average cost of capital model. At the same time, it will explore whether there exists a reasonable range of capital structure for the company.Methodologically, the research will collect the financial data of Thermo Fisher in recent years, including equity cost, debt cost, market value, tax rate and so on. By adjusting the assumed debt ratio, the trend of WACC can be calculated and indicated under different capital structures. Furthermore, this study will combine relevant reference to compare the differences between the theoretical optimal capital structure and the actual situation.The expected results show that a moderate level of debt may help to reduce the overall cost of capital, but an excessively high leverage ratio may increase financial risk, thereby raising the cost of equity. Through this research, I expect to gain a clearer understanding of how capital structure decisions affect company value and deepen my understanding of corporate financial management theory.