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9 10 a. Here is the condensed 2020 balance sheet for Skye Computer Company (in thousands of dollars). 11 Compute the market value weights using
9 10 a. Here is the condensed 2020 balance sheet for Skye Computer Company (in thousands of dollars). 11 Compute the market value weights using the information provided below. Only include appropriatr sources. 12 13 CONDENSED BALANCE SHEET FOR SKYE COMPUTER COMPANY 14 15 MV Capital Structure 16 Dollars % 17 2020 Additional information for part a: 18 Current assets $ 40,000 Common Stock Price - Po 19 Net fixed assets $ 60,000 Common shares outstanding (000) 20 Total assets $ 100,000 Preferred Stock Price - Pp 21 Preferred shares outstanding (000) 22 Accounts payable and accruals $ 10,000 23 Long-term debt $ 20,000 24 Preferred stock $ 20,000 25 Common stock $ 20,000 26 Retained earnings $ 30,000 27 Total common equity $ 50,000 28 Total liabilities & equity $ 100,000 $0 0.0% 29 $162.00 1,000 $90.00 200 60 61 d. Use the dividend model to compute the cost of common equity from retained earnings. The common stock 62 sells for $162.00, last year's dividend (D.) was $6.00, and security analysts are projecting that the common dividend 63 will grow at an annual rate of 8.1%. 64 65 D. $6.00 66 D1 67 PO $162.00 68 g 8.1% 69 70 rs 71 83 84 f. Now calculate the cost of common equity from retained earnings, using the Bond Yield Premium method, 85 where Skye uses a risk premium add-on of 5%. 86 87 88 89 90 g. What rate should be used for the cost of common equity from retained earnings? Explain 91 92 93 94 Cost of common equity estimate = 95 96 h. If Skye continues to use the same market value capital structure from above, what is the firm's WACC assuming that 97 it uses only retained earnings for equity. 98 99 WACC using retained earnings 100 101 Wa 102 Wp 103 Wc 104 0.0% 105 106 WACC 107 108 109 i. Use the dividend model to compute the cost of common equity assuming 110 that flotation cost of 10% would be required to sell new common stock. 111 10% 112 Flotation cost for common = 113 114 115 116 re
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