Question
Suppose the Schoof Company has this book value balance sheet: The current liabilities consist entirely of notes payable to banks, and the interest rate on
Suppose the Schoof Company has this book value balance sheet:
The current liabilities consist entirely of notes payable 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 structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 9%, and a 20-year maturity. The going rate of interest on new long-term debt, rd, is 12%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $64 per share. Calculate the firm's market value capital structure. Round your answers to two decimal places.
Short Term Debt | $ | % |
Long Term Debt | $ | % |
Common Equity | $ | % |
Total Capital | $ | % |
Current assets Fixed assets Total assets $30,000,000 50,000,000 $80,000,000 Current liabilities $10,000,000 10,000,000 Notes payable 20,000,000 Long-term debt Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total claims $80,000,000
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