4567 8 Here is the condensed 2021 balance sheet for Skye Computer Company (in thousands of dollars): CONDENSED BALANCE SHEET FOR SKYE COMPUTER COMPANY Book Value Capital Structure % incl. Current % excl. Current Liabilities Liabilities Market Value Capital Structure 9 10 11 Current assets 12 Net fixed assets 2021 $2,000 3,000 13 Total assets $5,000 14 15 Accounts payable and accruals $900 16 17 Short-term debt 100 1,100 $1,200 250 1,300 1,350 23 Total common equity $2,650 18 Long-term debt 19 Total debt 20 Preferred stock 21 Common stock 22 Retained earnings 24 Total liabilities & equity 25 27 28 $5,000 Dollar Values % excl. Current Liabilities 26 Skye's earnings per share last year were $3.20. The common stock sells for $55.00, last year's dividend (Do) was $2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skye's preferred stock pays a dividend of $3.30 per share, and its preferred stock sells for $30 per share. The firm's before-tax cost of debt is 10%, and its marginal tax rate is 25%. The firm's currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skye's beta is 1.516. The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1.2 million. 29 30 31 32 33