FIN 330 Module 6 Discussion Example

Course	FIN 330 Corporate Finance
Module	Module 6
Paper type	undergraduate discussion post on capital structure and financing choices
Length	About 370 words, 3 pages
Format	APA 7 student paper
School	Southern New Hampshire University
Program	BS Finance
Updated	October 2026

Free sample paper for FIN 330 Module 6

Module Six Discussion

Debt, New Shares or Our Own Working Capital?

The company needs $73 million for the propane line. It has $210 million of notes, EBITDA of $102 million and a loan covenant capping debt at 3.0 times EBITDA. Its 24 million shares trade near $40. I looked at three ways to raise the money.

All debt: borrowing $73 million at about 6.1 percent adds $4.5 million of interest a year. Debt would rise to $283 million, or 2.8 times EBITDA, leaving almost no room if earnings dipped in a recession. Interest coverage would fall from 6.1 to about 4.5 times.

All equity: at a net price of about $38.50 after fees and a discount, the company would sell roughly 1.9 million shares, about 8 percent dilution. Earnings per share would fall until the line became profitable.

Internal funds plus some debt: Module Two found about $46 million tied up in receivables and inventory beyond what peers need. Moving dealers from 60-day to 45-day terms and clearing older-refrigerant inventory over eighteen months could release most of it. The remaining $27 million would come from the revolving credit line, taking debt to $237 million, or 2.3 times EBITDA.

What this page is doingThree ways to pay.

The Modigliani-Miller result, as summarized by Brealey et al. (2023), says that without taxes or frictions financing cannot change a firm's value, so real-world effects must come from taxes, distress costs and information. The tax benefit of debt favors borrowing, but the covenant shows the distress side. Myers and Majluf (1984) explain why issuing stock is costly in practice: investors suspect managers sell shares when they think the price is high, so announcements tend to push prices down. Myers (1984) turned this into the pecking order: internal funds first, then debt, then equity. Graham and Harvey (2001) found that CFOs care most about financial flexibility and credit ratings, which is exactly what the covenant threatens.

I recommend the third option. It follows the pecking order, preserves borrowing room for a downturn and avoids dilution. The risk is that dealers resist shorter terms, so the plan should phase them in.

What this page is doingWhat theory says.

If the dealers pushed back and only half the working capital came free, would you borrow the rest or issue some equity, and why?

What this page is doingA question for classmates.

References

Brealey, R. A., Myers, S. C., & Allen, F. (2023). Principles of corporate finance (14th ed.). McGraw Hill.

Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2-3), 187-243. https://doi.org/10.1016/S0304-405X(01)00044-7

Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 574-592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x

Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221. https://doi.org/10.1016/0304-405X(84)90023-0

What the FIN 330 Module 6 instructions ask for

The Module Six discussion in FIN 330 usually asks how companies choose between debt and equity, sometimes for a specific project or company, and how theories such as Modigliani and Miller, the trade-off theory and the pecking order explain those choices. A strong post applies the theory to numbers: what new debt does to coverage ratios and covenants, what new shares do to ownership and earnings per share, and what internal funds are available. It reaches a recommendation and explains which theory best fits the choice. Some versions ask about a real company's recent financing decision, which you can find in its annual report or news coverage. Check whether the prompt wants a recommendation or an explanation.

How this FIN 330 Module 6 discussion example is built

The post compares three ways to fund the $73 million propane line. New debt alone would raise borrowing to about 2.8 times EBITDA, close to the 3.0 limit in the company's loan agreement. Selling about 1.9 million new shares would dilute owners by roughly 8 percent and, as Myers and Majluf predict, might signal that managers think the stock is overpriced. The recommended mix uses $46 million released by tightening dealer terms and clearing old inventory plus a $27 million draw on the revolving line, keeping debt near 2.3 times EBITDA. The post links the choice to the pecking order theory and to survey evidence that chief financial officers value financial flexibility above most other factors.

Where the FIN 330 Module 6 rubric puts the points

Grading for this discussion typically weighs accurate use of capital structure theory, application to a specific financing decision, quantitative support such as coverage ratios or dilution, a clear recommendation and replies that push classmates further. The best posts calculate the effect of each option on key ratios, explain why the recommended choice fits the company's situation and acknowledge its risks. Posts lose credit for describing theories without applying them, for ignoring covenants or credit ratings and for recommending debt or equity in general terms. Instructors may also reward attention to the company's credit rating and how each option would affect it.

FIN 330 Module 6 help: the mistakes that cost points

Start with the company's numbers: current debt, earnings before interest, taxes, depreciation and amortization, covenants and share price. Calculate what each financing option does to debt ratios, coverage and shares outstanding. Then bring in theory to explain the choice rather than leading with it. Remember that internal funds, including cash released from working capital, are often the first choice in practice. In replies, ask classmates how their recommendation would hold up if the project underperformed. Keep calculations brief in a discussion post; one sentence per option with the key ratio is usually enough. Name the theory that best explains your recommendation, and say where it falls short. Use the replies to stress-test classmates' choices with a downturn scenario.

Get FIN 330 Module 6 written to your instructions

Send the FIN 330 Module 6 prompt. The post will compare financing options with the company's own numbers, link the choice to capital structure theory and close with a question for classmates. About two days, and your first post is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.

More FIN 330 papers and related BS Finance samples

FIN 330 Module 6 questions, answered

Where can I find a free FIN 330 Module 6 Discussion sample?

This page includes the full FIN 330 Module 6 post comparing debt, equity and internal funds for a $73 million project.

What is the pecking order theory?

The theory that firms prefer internal funds first, then debt, and issue new equity last, because outside investors may read a share issue as a sign that the stock is overvalued.

What did Modigliani and Miller show about capital structure?

That in a world without taxes, bankruptcy costs or information differences, how a firm is financed does not change its value, which shows where real-world effects come from.

What is the trade-off theory of capital structure?

The view that firms balance the tax savings from debt against the expected costs of financial distress when choosing how much to borrow.

What is a debt covenant?

A promise written into a loan, for example keeping borrowing under three times EBITDA, that a company must keep or risk its lenders calling the loan.