Question

Suppose the Schoof Company has this book value balance sheet:

Current assets		$30,000,000		Current liabilities		$10,000,000
Fixed assets		50,000,000		Long-term debt		30,000,000
				Common stock
				(1 million shares)		1,000,000
				Retained earnings		39,000,000
Total assets		$80,000,000		Total claims		$80,000,000

The current liabilities consist entirely of notes payable to banks, and the interest rate on this debt is 9%, 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 6%, and a 15-year maturity. The going rate of interest on new long-term debt, r_d, is 11%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $60 per share. Calculate the firm's market value capital structure. Round your answers to two decimal places.

Short-term debt		$		%
Long-term debt		$		%
Common equity		$		%
Total capital		$		%

Answer 1

Firm's Market value Capital structure DATE PAGE Short term Dett $ 10000000 11-20 / $ 19213695 2.1.54% Long term Debt (ww.) Common Equity Total Capital $ 60,000,000 67.26% $ 89213695 100% WH-1 Intruisie Value = Coupon & Puff & Redemption amount & PuIF = 1 800,000 x PVAf("%, 18 years 30006000 PriF (11%, 15 years) $ 19213695

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