Capital Structure Analysis of Boot Barn Holdings Inc.

Yixin Zhang

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.ACCOUNTING

Faculty Research Mentor: Kakolyris, Andreas  

Abstract:

This project analyzes the capital structure of Boot Barn Holdings, Inc. by examining how changes in leverage affect the company’s weighted average cost of capital (WACC). Boot Barn is a publicly traded U.S. specialty retailer that focuses on western and work-related apparel and footwear. As a growing company in the retail industry, understanding its financing decisions is important for evaluating firm value and financial risk.The objective of this study is to estimate Boot Barn’s current cost of capital and explore how alternative debt levels may influence its overall financing cost. Using publicly available financial data, the cost of equity is estimated through the Capital Asset Pricing Model (CAPM), incorporating beta, the risk-free rate, and the market risk premium. The cost of debt is derived from the company’s borrowing costs and adjusted for corporate taxes. These components are combined to calculate the firm’s WACC. A sensitivity analysis is then conducted to simulate different leverage scenarios and observe how changes in beta and financial risk affect the company’s cost of capital.The findings suggest that while moderate leverage can provide tax benefits, excessive debt increases financial risk and may raise the firm’s overall cost of capital. This analysis illustrates how capital structure decisions play a critical role in corporate financial strategy and firm valuation.