on January 1, the total market value of the Tysseland Company was $60 million. During the year, the company plans to raise and invest $30 million in new projects. The firms present market value capital structure, shown here, is considered to be optimal. there is not short-term debt. (Please show work)

Chapter 11 Determining the Cost of Capital Debt $30,000,000 Common equity 30,000,000 Total capital $60,000,000 New bonds will have an 8% coupon rate, and they will be sold at par. Com- mon stock is currently selling at $30 a share. The stockholders' required rate of return is estimated to be 12%, consisting of a dividend yield of 4% and an expected constant growth rate of 8%. (The next expected dividend is $1.20, the dividend yield is $1.20/$30 a. In order to maintain the present capital structure, how much of the new investment must be financed by common equity? h Assuming there is sufficient cash flow for Tysseland to maintain its tar- get capital structure without issuing additional shares of equity, what is 40.) The marginal tax rate is 40%. its WACC? Suppose now that there is not enough internal cash flow and the firm c. must issue new shares of stock. Qualitatively speaking, what will happen to the WACC? No numbers are required to answer this question. H- 16 Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet: Current assets $ 30,000,000 Current liabilities Notes payable $ 20,000,000 $ 10,000,000 30,000,000 70,000,000 ong-term debt Foxed assets 1,000,000 Common stock (1 million shares) 39,000,000 Retained earnings $100,000,000 Total assets $100,000,000 Total liabilities and equity The notes payable are to banks, and the interest rate on this debt is 10%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company's permanent capital ructure. The long-term debt consists of 30,000 bonds, each with a par val- ue of $1,000, an annual coupon interest rate of 6%, and a 20-year maturity. The going rate of interest on new long-term debt, r is 10%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $60 per share. Calculate the firm's market value capital structure