Homework Answers
Short term debt =Notes Payable =10000000
Coupon =7%*1000 =70
Number of Years =25
Cost of Debt =12%
Price of Bond =PV of Coupons+PV of Par Value
=70*((1-(1+12%)^-25)/12%+1000/(1+12%)^25=607.8430444
Market Value of Debt =30000*607.8430444=18235291.33
Market value of Common Equity =62*1000000=62,000,000
Total Market Value
=10000000+18235291.33+62,000,000=90235291.33
Short Term debt =10000000/90235291.33=11.08%
Long term debt =18235291.33/90235291.33=20.21%
Common Equity =62000000/90235291.33=68.71%
Total =100%
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