Question
Five years ago Hemingway Inc. issued 6,000 30-year bonds with par values of $1,000 at a coupon rate of 6%. The bonds are now selling
Five years ago Hemingway Inc. issued 6,000 30-year bonds with par values of $1,000 at a coupon rate of 6%. The bonds are now selling to yield 5%. The company also has 15,000 shares of preferred stock outstanding that pay a dividend of $6.50 per share. These are currently selling to yield 13%. Its common stock is selling at $21, and 200,000 shares are outstanding. Assume that the coupon payments are semi-annual. Calculate Hemingway's market value based capital structure. Round the values to the nearest dollar and the weights to two decimal places. Round PVF and PVFA values in intermediate calculations to four decimal places. Do not round other intermediate calculations. Component Value Capital Structure Debt $ 6,927,260 58.32 % Preferred stock 750,000 6.31 % Equity 4,200,000 35.36 % Total Capital $ 11,877,260 100
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