Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Notes payable 10,000,000 Fixed assets 70,000,000 Long-term debt 30,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000
Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Notes payable 10,000,000 Fixed assets 70,000,000 Long-term debt 30,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $100,000,000 Total liabilities and equity $100,000,000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet: value capital structure. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Short-term debt Long-term debt Common equity Total capital $
Transcribed Image Text:Market Value Capital Structure
Suppose the Schoof Company has this book value balance sheet:
Current assets
Fixed assets
Total assets
$30,000,000
70,000,000
$100,000,000
Current liabilities
$20,000,000
Notes payable
10,000,000
Long-term debt
30,000,000
Common stock (1 million shares)
Retained earnings
1,000,000
Total liabilities and equity
39,000,000
$100,000,000
The notes payable are to banks, and the interest rate on this debt is 8%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of
the company's permanent capital structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 7%, and a 25-year maturity. The
going rate of interest on new long-term debt, rd, is 10%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $54 per share. Calculate the firm's market
value capital structure. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places.
Short-term debt
%
Long-term debt
Common equity
Total capital
$
%
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