Capital Structure Analysis: Mattel, Clorox and MGM Resorts

According to a report in the Journal of Applied Economics, companies with earnings/price ratios that are higher than their estimated after-tax borrowing costs, like Mattel, demonstrate that managers of publicly traded companies are in fact reluctant to make capital structure changes. Clorox, and MGM Resorts International also fit into this category, per my hypothesis. I suggest a radical move for these risk-averse managers based on my analysis of their balance sheets: paying down debt with cash-on-hand for all three of these companies and eschewing the tax lawyers' advice -- conventional wisdom from a time when interest rates were higher -- that has gotten them into this unsustainable level of debt at the current moment. These companies are paying junk bond prices the interest rates for their debt. They shouldn't have to do so.

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COST OF CAPITAL ANALYSIS OF MATTEL

U.S.-based...
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