Question
Sluggo, Inc. Makers of the Worlds Best 9-inch Nails Financials (in thousands): ASSETS: Cash $500; Inventory $100; Accounts Receivables $200; Plant & Equipment $2000, Depreciation
Sluggo, Inc. Makers of the Worlds Best 9-inch Nails Financials (in thousands): ASSETS: Cash $500; Inventory $100; Accounts Receivables $200; Plant & Equipment $2000, Depreciation $200; Land $2000, Goodwill $100, Trademark $100 LIABILITIES: Current Liabilities $50; Long-Term Liabilities $1650 Gross income for 2020 is $1500 (all credit sales); COGS is $400, Administrative and General expenses are $400, Sluggo pays 4% interest on its liabilities and its corporate tax rate is 20%. Capital Improvement: Sluggo wants to build a factory which would produce the steel for the 9-inch nails. The initial cash outlay is $1000, the factory is expected to be productive for 5 years, the required rate of return is 5%, and the free cash flow each year is expected to be $250. Capital Structure: Currently, when Sluggo finances a capital improvement, it uses: bonds (debt) and raises 35% of raised money in debt; common stock where 60% of raised money is from retained earnings, and 5% of raised capital is from preferred stock. Capital structure: 35% bonds, 60% common stock, 5% preferred stock. Bonds: 10-year, 4% coupon, market value is $975, corporate tax rate is 20% Common stock: Beta of 1.25, risk free rate of 2%, market risk of 9% Preferred stock: Par value of $100.00, dividend rate is 10%, market value of $100.00. Create a balance sheet?
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