Testbank, Question 15 An analyst has obtained the following information about Maudite Brewers Co.: Book value...

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Testbank, Question 15 An analyst has obtained the followinginformation about Maudite Brewers Co.: Book value of assets$25,000; book value of common equity $10,000; book value ofpreferred shares $5,000. The company has 4,000 common sharesoutstanding which are currently trading at $5 per share. Thecompany has 3,000 preferred shares outstanding which are currentlytrading at $2 per share. The yield on the debt equals the couponrate. The weights used to determine the weighted average cost ofcapital are: Common Equity Preferred Equity Debt 55.56% 16.67%27.77% 40% 20% 40% 80% 10% 10% Cannot be determined because we needthe market value of debt.

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4.3 Ratings (778 Votes)

Market Value Capital Structure Market Value of Common Stock 20000 4000 Shares x 5 per share Market Value of Preferred Stock 6000 3000 Shares x 2 per share Market Value of See Answer

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Testbank, Question 15 An analyst has obtained the followinginformation about Maudite Brewers Co.: Book value of assets$25,000; book value of common equity $10,000; book value ofpreferred shares $5,000. The company has 4,000 common sharesoutstanding which are currently trading at $5 per share. Thecompany has 3,000 preferred shares outstanding which are currentlytrading at $2 per share. The yield on the debt equals the couponrate. The weights used to determine the weighted average cost ofcapital are: Common Equity Preferred Equity Debt 55.56% 16.67%27.77% 40% 20% 40% 80% 10% 10% Cannot be determined because we needthe market value of debt.