MCI Case AnalysisINTRODUCTIONMCI is at a critical point in its company's history. After going public in 1972, they experienced several years of operating losses. Then, in 1974, the FCC ordered MCI's largest competitor, AT&T, to provide interconnection to MCI and the rest of the long-distance market. With a more level playing field, the opportunities to increase market share and revenue were significant. To maximize this opportunity MCI needed capital. Their poor financial performance has forced them to use less traditional tools to obtain financing. The acquired capital supported their growth until they reached a level of profitability in 1978. Thereafter they continued to increase their net income and the quality of their balance sheet. With continued growth prospects tempered by some regulatory uncertainty, they must determine their optimal financial structure for the future. CAPITAL REQUIREMENTS MCI's capital requirements for the next 3 years are x, y and z. (see appendix A). These values ​​are based on a number of different assumptions. (See attachment B). The forecast is not without a level of uncertainty. Specifically, there are regulatory decisions whose outcome is currently unclear. This could impact the profit margin by plus or minus seven percentage points. (See Table c) CAPITAL STRUCTURE MCI's current capital structure is x% debt and y% equity. Their key ratios are a, b and c. Compared to other companies in the utilities sector, they appear to be underutilizing (debt to equity). (See attachment D). Referring to the prediction it is expected that b...... half of the paper ...... in the case (if any) and the following questions:1. What are MCI's future needs for external funds likely to be?2. What is the appropriate capital structure for MCI?3. How has MCI raised external funding in the past? How sensible were these decisions?4. What should MCI do now? BIBLIOGRAPHY Unnamed author (2002), Assessing a Firm's Future Financial Health, Harvard Business School Publishing. Stein, J. (1992). Convertible bonds as backdoor equity financing. Retrieved June 12, 2006, from the World Wide Web at: http://www.financeprofessor.com/summaries/Stein1992ConvBond%20paper.htm.Jen, F, Choi, D, & Lee, S. (1997). Some evidence on why companies use convertible bonds. Journal of Applied Corporate Finance. Retrieved June 12, 2006, from the World Wide Web at: http://www.blackwell-synergy.com/links/doi/10.1111/j.1745-6622.1997.tb00124.x.