3. (25 points) The company has the following book value balance sheet:

Current Assets $30,000,000 Current Liabilities $20,000,000

Long-Term Debt ($1000 par value) $40,000,000

Common Stock (1 million shares) $ 1,000,000

Fixed Assets $70,000,000 Retained Earnings $39,000,000

Total Assets $100,000,000 Total Liabilities and Equity $100,000,000

The long-term debt consists of 40,000 bonds outstanding with a par value of $1,000 each. The annual coupon rate on the bonds is 6%, paid semiannually, and the bonds have 20-years to maturity. The current market rate of interest (yield to maturity) on 20-year debt, r_d is 10%. What is the current market price of one bond?

The total market value of the long-term debt is:

The company's common stock currently sells for $60 per share. Calculate market value capital structure (percent each of debt financing and equity financing) in the market value capital structure.

Market Value Capital Structure is: (fill in the blanks)

Market Value Long-term debt $_________ _____%

Market Value Common equity _________ _____%

Total Market Value debt and equity $________ 100.00%