Question

Five years ago Hemingway Inc. issued 6,000 30-year bonds with par values of $1,000 at a coupon rate of 6%. The bonds are now selling to yield 5%. The company also has 15,000 shares of preferred stock outstanding that pay a dividend of $6.50 per share. These are currently selling to yield 13%. Its common stock is selling at $21, and 200,000 shares are outstanding. Assume that the coupon payments are semi-annual. Calculate Hemingway's market value based capital structure. Round the values to the nearest dollar and the weights to two decimal places. Round PVF and PVFA values in intermediate calculations to four decimal places. Do not round other intermediate calculations.

Component	Value	Capital Structure
Debt	$	%
Preferred stock		%
Equity		%
Total Capital	$	%

Answer 1

Pmt If Semi Annual Coupon Nper Pmt Rate FV 30*2 1000*0.06*1/2 0.05*1/2 Nper $ L $ 60 30.00 0.025 1,000.00 Py payment Number of periods Present value Face value Yield to maturity FV Rate (-PV(rate,nper,pmt, fv)) (-PV(0.025,60,30, 1000) $1,154.54 $ 1,154.54 Current price of Bond Preference stock Price Dividend/Rate (6.50/0.13) 50.00 Equity Price $ 21.00 Debt Prefence stock Common Equity 6000*1154.54 15000*50 200000*21 Total capital $ $ $ $ Value 6,927,259.69 750,000.00 4,200,000.00 11,877,259.69 Capital Structure 58.32% 6.31% 35.36% 100.00%