Taunton Com. information appears to be mesing change the whole 2 Based in Winnipeg, Manitoba, Taunton Corp. (TC) was founded to provide security systems, facilities controls and related services. TC established a solid reputation for quality and the business grew thanks to strong relationships with large, long-term customers in Canada and the United States. The Research and Innovation Group (RIG) is the development side of the company. They are considering a new contract that will strain resources for not only RIG, but the entire company. With an upfront cost of $10.0 million, managers understand that the cost of capital will be a key part of maintaining and improving Clearview's competitive edge. You have been asked to calculate the company's weighted average cost of capital (WACC), based on the following information 11 14 Over the last five years the annual dividends on the firm's common stock have grown at 4.00 percent per year and this growth is expected to continue indefinitely. A common share dividend of $1.130 per share was recently paid. Common shares trade at $82,000 per share. The company has authorized 391,000 common shares, with 325,000 common shares issued and outstanding. 30 21 22 21 The company has issued 131,000 of the 150,000 preferred shares authorized. The annual preferred share dividend is $2.500 per share. The latest preferred share price is $57.300 per share. TC has an outstanding bond issue, payable semi-annually, that originally had a 30 year maturity. The initial bond offering was sold 7 years ago, at par and raised 519.90 million dollars. (To be specific 19,900 bonds were sold at $1,000 each.) The yield to maturity, when they were issued, was 5.40 percent Currently, the nominal yield to maturity on bonds with a similar risk is at 5:29 percent. The company will use its current capital structure to set target weights for debt, preferred shares and common shares Flotation costs are 3.00 percent for preferred shares, 4.00 percent for common shares and 5.00 percent for debt. The company's tax rate is 35.00 percent. After-tax earnings for the year will be $2.00 million and the company has a payout ratio of 45.00 percent 1 2 3 Taunton Corp. Unless directed otherwise Percentages showed to decimal you were the rule 12 Km 1234 0.1214) and do not enter the percent sit Blond prices that we de 12 Pershore More here to three decimal pool . Todelled to deciso SL) 5 G 7 9 10 The following table is presented to help you o panire the information from the case: (there are no marks associated with the information in this table) Bonds Pref Y. Opercent Dp $2.50 01 Te 35.0 percent Pp: S5730 PO: F 5.00 percent F 3.00 percent F 12 Common S 113 $82,00 4.00 percent 4.00 percent 4 5 SO Requirements: A. Find market values of outstanding bonds, preferred shares and common sharest 1 Bonds: a. What is the market value of each bond? Enter your answer to two decimal places y $12. b. What is the total market value of bonds at Dec 31, 2020 found your awr to whole nunter. For ramal S1234.000 not 51 236 million) 2. Preferred shares: What is the total market value of preferred shares at Dec 31, 2020 Pound your answer to hele numbers. For 1.234.000 not $1.4 million SO SO 3. Common shares: What is the total market value of common shares at Dec 31, 2020 and your owww to hunters for $1.234.000 B. What weights are assigned to debt, preferred shares and emman einn VA Round your own to whole numbe Force Inot 51224 min B. What weights are assigned to debt, preferred shares and common equity on Dec 31, 2020 (und of your own two decimal ploom you want to enter the ber 12 for enter 12.34 no 12.30 od do not enter the percent Debt. Preferred Common O percent O percent O percent C.Calculate the after-tax cost of the various components of WACC: (Round all your comment to two decimal act you want to enter the number, 12.30%, 1. Bonds a. What is the nominal yield-to-maturity? b. What is the effective yield-to-maturity? c. Calculate the after-tax cost of new debt (using the effective yield to maturity) Opercent O percent Opercent 2. Preferred shares: Opercent 3. Common equity in the form of retained earnings: O percent 4. Common equity in the form of new shares: D. What is the weighted Average Cost of Capitalis O percent 45 D. What is the Weighted Average cost of Capitali Mound all your own two decimal place you want to the ber 1234% 1. the company uses new debt, new preferred shares and just retained earnings? Weldib Debt Pref Common 46 47 48 49 50 51 52 53 54 55 56 57 58 59 percent percent percent percent WACC 2. the company uses new debit, new preferred shares and new common shares? After tax Cost Weights Debt Pref Common 60 61 WACC percent 62 63 E. How much of the new capital projects can be funded without using new shareholders? your wer in whole numbers. For 2.34000 mot SL) 55 56 Taunton Com. information appears to be mesing change the whole 2 Based in Winnipeg, Manitoba, Taunton Corp. (TC) was founded to provide security systems, facilities controls and related services. TC established a solid reputation for quality and the business grew thanks to strong relationships with large, long-term customers in Canada and the United States. The Research and Innovation Group (RIG) is the development side of the company. They are considering a new contract that will strain resources for not only RIG, but the entire company. With an upfront cost of $10.0 million, managers understand that the cost of capital will be a key part of maintaining and improving Clearview's competitive edge. You have been asked to calculate the company's weighted average cost of capital (WACC), based on the following information 11 14 Over the last five years the annual dividends on the firm's common stock have grown at 4.00 percent per year and this growth is expected to continue indefinitely. A common share dividend of $1.130 per share was recently paid. Common shares trade at $82,000 per share. The company has authorized 391,000 common shares, with 325,000 common shares issued and outstanding. 30 21 22 21 The company has issued 131,000 of the 150,000 preferred shares authorized. The annual preferred share dividend is $2.500 per share. The latest preferred share price is $57.300 per share. TC has an outstanding bond issue, payable semi-annually, that originally had a 30 year maturity. The initial bond offering was sold 7 years ago, at par and raised 519.90 million dollars. (To be specific 19,900 bonds were sold at $1,000 each.) The yield to maturity, when they were issued, was 5.40 percent Currently, the nominal yield to maturity on bonds with a similar risk is at 5:29 percent. The company will use its current capital structure to set target weights for debt, preferred shares and common shares Flotation costs are 3.00 percent for preferred shares, 4.00 percent for common shares and 5.00 percent for debt. The company's tax rate is 35.00 percent. After-tax earnings for the year will be $2.00 million and the company has a payout ratio of 45.00 percent 1 2 3 Taunton Corp. Unless directed otherwise Percentages showed to decimal you were the rule 12 Km 1234 0.1214) and do not enter the percent sit Blond prices that we de 12 Pershore More here to three decimal pool . Todelled to deciso SL) 5 G 7 9 10 The following table is presented to help you o panire the information from the case: (there are no marks associated with the information in this table) Bonds Pref Y. Opercent Dp $2.50 01 Te 35.0 percent Pp: S5730 PO: F 5.00 percent F 3.00 percent F 12 Common S 113 $82,00 4.00 percent 4.00 percent 4 5 SO Requirements: A. Find market values of outstanding bonds, preferred shares and common sharest 1 Bonds: a. What is the market value of each bond? Enter your answer to two decimal places y $12. b. What is the total market value of bonds at Dec 31, 2020 found your awr to whole nunter. For ramal S1234.000 not 51 236 million) 2. Preferred shares: What is the total market value of preferred shares at Dec 31, 2020 Pound your answer to hele numbers. For 1.234.000 not $1.4 million SO SO 3. Common shares: What is the total market value of common shares at Dec 31, 2020 and your owww to hunters for $1.234.000 B. What weights are assigned to debt, preferred shares and emman einn VA Round your own to whole numbe Force Inot 51224 min B. What weights are assigned to debt, preferred shares and common equity on Dec 31, 2020 (und of your own two decimal ploom you want to enter the ber 12 for enter 12.34 no 12.30 od do not enter the percent Debt. Preferred Common O percent O percent O percent C.Calculate the after-tax cost of the various components of WACC: (Round all your comment to two decimal act you want to enter the number, 12.30%, 1. Bonds a. What is the nominal yield-to-maturity? b. What is the effective yield-to-maturity? c. Calculate the after-tax cost of new debt (using the effective yield to maturity) Opercent O percent Opercent 2. Preferred shares: Opercent 3. Common equity in the form of retained earnings: O percent 4. Common equity in the form of new shares: D. What is the weighted Average Cost of Capitalis O percent 45 D. What is the Weighted Average cost of Capitali Mound all your own two decimal place you want to the ber 1234% 1. the company uses new debt, new preferred shares and just retained earnings? Weldib Debt Pref Common 46 47 48 49 50 51 52 53 54 55 56 57 58 59 percent percent percent percent WACC 2. the company uses new debit, new preferred shares and new common shares? After tax Cost Weights Debt Pref Common 60 61 WACC percent 62 63 E. How much of the new capital projects can be funded without using new shareholders? your wer in whole numbers. For 2.34000 mot SL) 55 56