Question
Assets Current assets $ 31,200,000 Net plant, property, and equipment 124,800,000 Total assets $156,000,000 Liabilities and Equity Accounts payable $ 11,000,000 Accruals 10,000,000 Current liabilities
Assets
Current assets $ 31,200,000
Net plant, property, and equipment 124,800,000
Total assets $156,000,000
Liabilities and Equity
Accounts payable $ 11,000,000
Accruals 10,000,000
Current liabilities $ 21,000,000
Long-term debt (45,000 bonds, $1,000 par value) 45,000,000
Total liabilities $ 66,000,000
Common stock (8,000,000 shares) 40,000,000
Retained earnings 50,000,000
Total shareholders' equity 90,000,000
Total liabilities and shareholders' equity $156,000,000
The stock is currently selling for $10 per share. The callable bond price is $1,055 if it is called on year 5 and 15-year of maturity, providing 10% coupon rate with semiannual payments. The beta is 1.90 with risk free rate 5.00% and the current market rate of interest is 8%. The firm's tax rate is 30%.
Requirements:
- Value of Bond, Current Yield, YTC & YTM
- Market Value of liabilities
- Why bond is selling at premium?
- WACC using book and market values
- Point out the capital and financial structure of the company.
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Focus On Personal Finance
Authors: Jack R. Kapoor, Les R. Dlabay Professor, Robert J. Hughes, Melissa Hart
5th Edition
0077861744, 978-0077861742
