Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $20,000,000 Fixed assets 70,000,000 Notes payable $10,000,000 Long-term...

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Finance

Market Value CapitalStructure
Suppose the SchoofCompany has this book value balance sheet:
Current assets $30,000,000 Current liabilities $20,000,000
Fixed assets 70,000,000 Notes payable $10,000,000
Long-term debt 30,000,000
Common stock (1 millionshares) 1,000,000
Retained earnings 39,000,000
Total assets $100,000,000 Total liabilities and equity $100,000,000
The notes payable areto banks, and the interest rate on this debt is 8%, the same as therate on new bank loans. These bank loans are not used for seasonalfinancing but instead are part of the company's permanent capitalstructure. The long-term debt consists of 30,000 bonds, each with apar value of $1,000, an annual coupon interest rate of 7%, and a25-year maturity. The going rate of interest on new long-term debt,r_d, is 10%, and this is the present yield to maturity onthe bonds. The common stock sells at a price of $62 per share.Calculate the firm's market value capital structure. Donot round intermediate calculations. Round your answers to twodecimal places.
Short-term debt $ %
Long-term debt
Common equity
Total capital $ %

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4.3 Ratings (602 Votes)

Capital Components Market Value Weight of Capital Structure Shortterm debt 10000000 1066 Longterm debt 21830700 2326 Common equity 62000000 6608 Total capital 93830700 10000 Market Value of each capital components Market Value of Shortterm debt Market See Answer

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Market Value CapitalStructureSuppose the SchoofCompany has this book value balance sheet:Current assets$30,000,000Current liabilities$20,000,000Fixed assets70,000,000Notes payable$10,000,000Long-term debt30,000,000 Common stock (1 millionshares)1,000,000Retained earnings39,000,000Total assets$100,000,000Total liabilities and equity$100,000,000The notes payable areto banks, and the interest rate on this debt is 8%, the same as therate on new bank loans. These bank loans are not used for seasonalfinancing but instead are part of the company's permanent capitalstructure. The long-term debt consists of 30,000 bonds, each with apar value of $1,000, an annual coupon interest rate of 7%, and a25-year maturity. The going rate of interest on new long-term debt,rd, is 10%, and this is the present yield to maturity onthe bonds. The common stock sells at a price of $62 per share.Calculate the firm's market value capital structure. Donot round intermediate calculations. Round your answers to twodecimal places.Short-term debt$%Long-term debtCommon equityTotal capital$%

Current assets	$30,000,000	Current liabilities	$20,000,000
Fixed assets	70,000,000	Notes payable	$10,000,000
		Long-term debt	30,000,000
		Common stock (1 millionshares)	1,000,000
		Retained earnings	39,000,000
Total assets	$100,000,000	Total liabilities and equity	$100,000,000