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Suppose that Smith Company is considering a new project. They are trying to determine the required rate of return for their debt and equity holders.
Suppose that Smith Company is considering a new project. They are trying to determine the required rate of return for their debt and equity holders. See the information below:
- A 7.5% percent annual coupon bond with 20 years to maturity, selling for 104 percent of par. The bonds make semiannual payments. What is the before tax cost of debt? If the tax rate is 40%, what is the after-tax cost of debt?
- The firms beta is 1.2. The risk-free rate is 4.0% and the expected market return is 9%. What is the cost of equity using CAPM?
12/31/2018 | 12/31/2017 | 12/31/2016 | 12/31/2015 | |
Current Assets | ||||
Cash And Cash Equivalents | 8,719,000 | 10,607,000 | 9,157,000 | 9,095,000 |
Short Term Investments | 270,000 | 8,897,000 | 6,966,000 | 2,912,000 |
Net Receivables | 7,140,000 | 7,021,000 | 6,693,000 | 6,436,000 |
Inventory | 3,126,000 | 2,944,000 | 2,722,000 | 2,719,000 |
Other Current Assets | 2,042,000 | 43,000 | 31,000 | 730,000 |
Total Current Assets | 21,297,000 | 29,512,000 | 25,569,000 | 21,892,000 |
Long Term Investments | 2,407,000 | 2,039,000 | 1,949,000 | 2,310,000 |
Property Plant and Equipment | 17,587,000 | 17,237,000 | 16,590,000 | 16,316,000 |
Goodwill | 14,806,000 | 14,741,000 | 14,429,000 | 14,176,000 |
Intangible Assets | 15,823,000 | 13,835,000 | 13,432,000 | 13,080,000 |
Other Assets | 5,122,000 | 910,000 | 635,000 | 749,000 |
Total Assets | 77,042,000 | 78,274,000 | 72,604,000 | 68,523,000 |
Current Liabilities | ||||
Accounts Payable | 7,211,000 | 6,724,000 | 6,157,000 | 5,545,000 |
Short/Current Long Term Debt | 3,951,000 | 4,017,000 | 4,400,000 | 3,108,000 |
Other Current Liabilities | 6,601,000 | 4,112,000 | 3,870,000 | 3,882,000 |
Total Current Liabilities | 17,763,000 | 14,853,000 | 14,427,000 | 12,535,000 |
Long Term Debt | 28,293,000 | 33,793,000 | 30,052,000 | 29,591,000 |
Other Liabilities | 12,611,000 | 14,522,000 | 11,102,000 | 10,466,000 |
Total Liabilities | 58,667,000 | 63,168,000 | 55,581,000 | 52,592,000 |
Stockholders' Equity | ||||
Total Stockholder Equity | 18,375,000 | 15,106,000 | 17,023,000 | 15,931,000 |
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