BOOK Accounts Payable Accruals and Other Current Liabilities Notes Payable (for working capital) TOTAL CURRENT LIABILITIES $120,124 64.111 58.125 242,360 Long-term Debt TOTAL LIABILITIES 275,000 517,360 Preferred Stock (par $100) Common Equity ($1 par) Excess of Par Retained Earnings TOTAL LIABILITIES AND EQUITY 5.000 10.000 40.000 458,445 $1,030,805 Exhibit V: Market, Industry, and SCRPC's Financial Information Treasury Bill Rate 4.25% Long-term Government Bond Yield 7.45% Long-term Corporate Bond Yield | 8.75% Average Beta for Industry 1.25 SCRPC'S Beta 1.45 Average P/E Ratio for Industry | 13.50 SCRPC'S Recent P/E Ratio 10.75 Recent Price of SCRPC's Common Stock $36.01 SCRPC's Tax Rate 40% SCRPC's Bond Risk Premium 4.0% SCRPC's Bond's are selling at $910 with a Coupon. Rate of 7.25 and maturity of 14 years. Floatation costs for the bonds would be $5 per bond. SCRPC's preferred stock ($100 par) pays a $14 dividend and is selling for $110. The firm would have a $5 floatation cost if it sold preferred stock today. If SCRPC sold additional common stock, the floatation cost and the decline in value would be about 20% of the current price. Exhibit VI: Find the WACC (using Retained Earnings) After Tax Cost Market Value (000's) Weight Contribution Component Notes Payable Bonds Preferred Stock Common Stock TOTAL Exhibit VII: Find the WACC (using New Common Stock) Component After tax Cost Market Value (000's) Weight Contribution Notes Payable Bonds Preferred Stock Common Stock TOTAL What is SCRPC's cost of capital when the firm has to issue new common stock and the Gordon Model estimate (8.25%) is used? BOOK Accounts Payable Accruals and Other Current Liabilities Notes Payable (for working capital) TOTAL CURRENT LIABILITIES $120,124 64.111 58.125 242,360 Long-term Debt TOTAL LIABILITIES 275,000 517,360 Preferred Stock (par $100) Common Equity ($1 par) Excess of Par Retained Earnings TOTAL LIABILITIES AND EQUITY 5.000 10.000 40.000 458,445 $1,030,805 Exhibit V: Market, Industry, and SCRPC's Financial Information Treasury Bill Rate 4.25% Long-term Government Bond Yield 7.45% Long-term Corporate Bond Yield | 8.75% Average Beta for Industry 1.25 SCRPC'S Beta 1.45 Average P/E Ratio for Industry | 13.50 SCRPC'S Recent P/E Ratio 10.75 Recent Price of SCRPC's Common Stock $36.01 SCRPC's Tax Rate 40% SCRPC's Bond Risk Premium 4.0% SCRPC's Bond's are selling at $910 with a Coupon. Rate of 7.25 and maturity of 14 years. Floatation costs for the bonds would be $5 per bond. SCRPC's preferred stock ($100 par) pays a $14 dividend and is selling for $110. The firm would have a $5 floatation cost if it sold preferred stock today. If SCRPC sold additional common stock, the floatation cost and the decline in value would be about 20% of the current price. Exhibit VI: Find the WACC (using Retained Earnings) After Tax Cost Market Value (000's) Weight Contribution Component Notes Payable Bonds Preferred Stock Common Stock TOTAL Exhibit VII: Find the WACC (using New Common Stock) Component After tax Cost Market Value (000's) Weight Contribution Notes Payable Bonds Preferred Stock Common Stock TOTAL What is SCRPC's cost of capital when the firm has to issue new common stock and the Gordon Model estimate (8.25%) is used
