Taunton Corp. Suppose you have been hired as a financial consultant to Taunton Corp., a large, publicly traded firm that is the market share leader in radon detection systems (RDS). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDS. The project will require an investment of $12.0 million dollars and the president of the company wants to be sure she understands her cost of capital before going ahead with the decision. Market information for the latest year-end (December 31/2020) is as follows: Debt The company has issued 24,700 bonds, each with a par value of $1,000 and a coupon rate of 6.70 percent (payable semi-annually). The bonds were issued 10 years ago with a 30 year maturity. They are currently selling for $905.00 each. Preferred Stock 146,000 preferred shares have been authorized (with 110,000 issued and outstanding). The closing price of preferred shares was $58.70 per share. Common Equity 518,000 common shares have been authorized (with 466,000 shares issued and outstanding). Common shares are selling for $60.00 per share HERE TO SAVE YOUR WUKK 024 Taunton Corp. A B E Common Equity D 518,000 common shares have been authorized (with 466,000 shares issued and outstanding). Common shares are selling for $60.00 per share. Taunton Corp. uses G. M. Wharton as its lead underwriter. Wharton charges 3.00 percent commission on new common stock issues, 6.00 percent on new preferred stock issues, and 4.00 percent on new debt issues. Wharton has included all direct and indirect flotation costs in these rates. The preferred shares were issued six years ago and pay an annual dividend of $1.25 per share. Last year, Taunton Corp. declared and paid a common share dividend of $1.71 per share. This represented a 4.00 percent growth in the common share dividend (a rate that is expected to continue into the future) and a dividend payout ratio of 35.0 percent (also expected to continue into the future). Taunton Corp.'s tax rate is 40.0 percent. Preliminary year-end results show net earnings (after interest, taxes and preferred share dividends) for the year ending December 31, 2020 is $3.0 million. Taunton Corp. The following table is presented to help you organize the information from the case: (Note: not all of these variables can be found in the case. You may have to calculate one or more of them.) Bonds Prer Common Dp: 01: Tc: Pp: PO: F F Requirements: A. Find market values of outstanding bonds, preferred shares and common shares: Supporting Info 1. Bonds: a. What is the market value of each bond? Enter your answer to two decimal places, le 51234 b. What is the total market value of bonds at Dec 31, 2020 fround your anseer to whole numbers. For example $1,254.000 no 51234 I DOO 2. Preferred shares: What is the total market value of preferred shares at Dec 31, 2020 Round your answer to whole numbers. For example, 51 234.000 not $1.234 million 3. Common shares: What is the total market value of common shares at Dec 31, 2020 Tout voor are to whombers for example, 51,234,000 not $1334 million Supporting info Debel Joercent B. What weights are assigned to debt preferred shares and common equity on Dec 31, 2020 Bestou see 1234 do not enter the contents Question WACC Sheet3 New CHERE TO SAVE YOUR WORK D24 A B D E G Suppo 1. Bonds: a. What is the market value of each bond? (Enter your answer to two decimal places. (eg $12.34)) b. What is the total market value of bonds at Dec 31, 2020 (Round your answer to whole numbers. For example, $1.234,000 not $1.234 million) I DIO 2. Preferred shares: What is the total market value of preferred shares at Dec 31, 2020 Round your answer to whole numbers. For example, $1.234 000 not $1.234 million) 3. Common shares: What is the total market value of common shares at 31, 2020 Round your answer to whole numbers. For example 51,234,000 not 1 234 million Sup B. What weights are assigned to debt, preferred shares and common equity on Dec 31, 2020 Rour your anster to two decimal places. les 1234 Do not enter the percent sien Debt Preferred Common percent percent percent C. Calculate the after-tax cost of the various components of WACC: TRound your answer to two decimal asce le 12 34) Dorot enter the percent Sur 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 vield-to-matunty). percent percent percent percent 2. Preferred shares: NACO Sheet3 HERE TO SAVE YOUR WORK 024 B C D E F M 0 Common N percent C. Calculate the after-tax cost of the various components of WACC (Round your answer to two decimal place le 12.34). Do not enter the percent sign) 1. Bonds Supporting Information percent percent percent percent percent Jpercent 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). 2. Preferred shares: 3. Common equity in the form of retained earnings: 4. Common equity in the form of new shares: D. What is the weighted Average Cost of Capital if: Enter your answer to two decamal places, le 12.34) Do not enter the percent sien 1. the company uses new debt, new preferred shares and just retained earnings? [Round figures to two decimal places le : 12.54). Do not enter the percent Weights Debt Pref Common Supporting information After-tax Cost Weighted Cost percent percent percent percent WACC Supporting informatic the company uses new debt, new preferred shares and new common shares? CLICK HERE TO SAVE YOUR WORK 024 A 3 H M 38 D F 6 4. Common equity in the form of new sharest percent 39 D. What is the weighted Average cost of capital: Enter your answer to two decimal places, le 12.341. Do not enter the percent) 40 41 Supporting Informatie 42 Alters Cost Weighted Cost Weights 1. the company uses new debt, new preferred shares and just retained earnings? Round all figures to two decimal places (124) Do not enter the percent in Debt Pret Common 14 45 percent percent percent percent WAC Supporting informal After-tax Cost Wighted Cost Welchts 48 49 50 51 52 53 54 55 56 2. the company uses new debt, new preferred shares and new common shares? Round ligures to two decimal places 12.341 Deter percent Debt Pref Common WACC percent Supporting informe E. How much of the new capital projects can be funded without using new shareholders? Enter your whole for amole 51.234.000 hot 51234 8 99 0 1 25 Taunton Corp. Suppose you have been hired as a financial consultant to Taunton Corp., a large, publicly traded firm that is the market share leader in radon detection systems (RDS). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDS. The project will require an investment of $12.0 million dollars and the president of the company wants to be sure she understands her cost of capital before going ahead with the decision. Market information for the latest year-end (December 31/2020) is as follows: Debt The company has issued 24,700 bonds, each with a par value of $1,000 and a coupon rate of 6.70 percent (payable semi-annually). The bonds were issued 10 years ago with a 30 year maturity. They are currently selling for $905.00 each. Preferred Stock 146,000 preferred shares have been authorized (with 110,000 issued and outstanding). The closing price of preferred shares was $58.70 per share. Common Equity 518,000 common shares have been authorized (with 466,000 shares issued and outstanding). Common shares are selling for $60.00 per share HERE TO SAVE YOUR WUKK 024 Taunton Corp. A B E Common Equity D 518,000 common shares have been authorized (with 466,000 shares issued and outstanding). Common shares are selling for $60.00 per share. Taunton Corp. uses G. M. Wharton as its lead underwriter. Wharton charges 3.00 percent commission on new common stock issues, 6.00 percent on new preferred stock issues, and 4.00 percent on new debt issues. Wharton has included all direct and indirect flotation costs in these rates. The preferred shares were issued six years ago and pay an annual dividend of $1.25 per share. Last year, Taunton Corp. declared and paid a common share dividend of $1.71 per share. This represented a 4.00 percent growth in the common share dividend (a rate that is expected to continue into the future) and a dividend payout ratio of 35.0 percent (also expected to continue into the future). Taunton Corp.'s tax rate is 40.0 percent. Preliminary year-end results show net earnings (after interest, taxes and preferred share dividends) for the year ending December 31, 2020 is $3.0 million. Taunton Corp. The following table is presented to help you organize the information from the case: (Note: not all of these variables can be found in the case. You may have to calculate one or more of them.) Bonds Prer Common Dp: 01: Tc: Pp: PO: F F Requirements: A. Find market values of outstanding bonds, preferred shares and common shares: Supporting Info 1. Bonds: a. What is the market value of each bond? Enter your answer to two decimal places, le 51234 b. What is the total market value of bonds at Dec 31, 2020 fround your anseer to whole numbers. For example $1,254.000 no 51234 I DOO 2. Preferred shares: What is the total market value of preferred shares at Dec 31, 2020 Round your answer to whole numbers. For example, 51 234.000 not $1.234 million 3. Common shares: What is the total market value of common shares at Dec 31, 2020 Tout voor are to whombers for example, 51,234,000 not $1334 million Supporting info Debel Joercent B. What weights are assigned to debt preferred shares and common equity on Dec 31, 2020 Bestou see 1234 do not enter the contents Question WACC Sheet3 New CHERE TO SAVE YOUR WORK D24 A B D E G Suppo 1. Bonds: a. What is the market value of each bond? (Enter your answer to two decimal places. (eg $12.34)) b. What is the total market value of bonds at Dec 31, 2020 (Round your answer to whole numbers. For example, $1.234,000 not $1.234 million) I DIO 2. Preferred shares: What is the total market value of preferred shares at Dec 31, 2020 Round your answer to whole numbers. For example, $1.234 000 not $1.234 million) 3. Common shares: What is the total market value of common shares at 31, 2020 Round your answer to whole numbers. For example 51,234,000 not 1 234 million Sup B. What weights are assigned to debt, preferred shares and common equity on Dec 31, 2020 Rour your anster to two decimal places. les 1234 Do not enter the percent sien Debt Preferred Common percent percent percent C. Calculate the after-tax cost of the various components of WACC: TRound your answer to two decimal asce le 12 34) Dorot enter the percent Sur 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 vield-to-matunty). percent percent percent percent 2. Preferred shares: NACO Sheet3 HERE TO SAVE YOUR WORK 024 B C D E F M 0 Common N percent C. Calculate the after-tax cost of the various components of WACC (Round your answer to two decimal place le 12.34). Do not enter the percent sign) 1. Bonds Supporting Information percent percent percent percent percent Jpercent 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). 2. Preferred shares: 3. Common equity in the form of retained earnings: 4. Common equity in the form of new shares: D. What is the weighted Average Cost of Capital if: Enter your answer to two decamal places, le 12.34) Do not enter the percent sien 1. the company uses new debt, new preferred shares and just retained earnings? [Round figures to two decimal places le : 12.54). Do not enter the percent Weights Debt Pref Common Supporting information After-tax Cost Weighted Cost percent percent percent percent WACC Supporting informatic the company uses new debt, new preferred shares and new common shares? CLICK HERE TO SAVE YOUR WORK 024 A 3 H M 38 D F 6 4. Common equity in the form of new sharest percent 39 D. What is the weighted Average cost of capital: Enter your answer to two decimal places, le 12.341. Do not enter the percent) 40 41 Supporting Informatie 42 Alters Cost Weighted Cost Weights 1. the company uses new debt, new preferred shares and just retained earnings? Round all figures to two decimal places (124) Do not enter the percent in Debt Pret Common 14 45 percent percent percent percent WAC Supporting informal After-tax Cost Wighted Cost Welchts 48 49 50 51 52 53 54 55 56 2. the company uses new debt, new preferred shares and new common shares? Round ligures to two decimal places 12.341 Deter percent Debt Pref Common WACC percent Supporting informe E. How much of the new capital projects can be funded without using new shareholders? Enter your whole for amole 51.234.000 hot 51234 8 99 0 1 25