Netgear has no debt, a market value of equity of $1.43 billion, $361 million of cash,...

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Netgear has no debt, a market value of equityof $1.43 billion, $361 million of cash, and an equity Beta of 2.0.Meanwhile, Westar Energy has $4.02 billion of debt, a market valueof equity of $7.16 billion, only $3.36 million of cash, and anequity Beta of 0.33.
Thus these two publicly traded firms have very different capitalstructures. Netgear is profitable and has been for the last decade;however, the firm’s management appears to be quite averse to debt,while the opposite can be stated for Westar Energy. Is themanagement of Netgear ignorant of the tax benefits of debt or doessomething else drive their decision to have no debt? How can oneexplain the sharp difference in capital structure between these twofirms?

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3.9 Ratings (766 Votes)

Net Gear Debt 0 MV of Equity 143 Billion Cash 361 M Beta Equity 2 Westar Energy Debt 402 B Equity 716 B Cash 336 M Beta equity 033 Though Netgear seems to have a good cash See Answer

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Netgear has no debt, a market value of equityof $1.43 billion, $361 million of cash, and an equity Beta of 2.0.Meanwhile, Westar Energy has $4.02 billion of debt, a market valueof equity of $7.16 billion, only $3.36 million of cash, and anequity Beta of 0.33.Thus these two publicly traded firms have very different capitalstructures. Netgear is profitable and has been for the last decade;however, the firm’s management appears to be quite averse to debt,while the opposite can be stated for Westar Energy. Is themanagement of Netgear ignorant of the tax benefits of debt or doessomething else drive their decision to have no debt? How can oneexplain the sharp difference in capital structure between these twofirms?