Flora Fountain has 26,000 shares of equity priced at $67 per share and the cost of equity is 13.60 percent. Flora Fountain also has 6,700 shares of preferred stock with a face value of $100, paying a coupon interest of 6.60 percent and selling in the market for $89.00 per share. The debt's YTM is 7.72 percent, its total nominal value is $368,000 and is priced in the market for 105 percent of its par value. If the tax rate is 35 percent, fi

Flora Fountain has 26,000 shares of equity priced at $67 per share and the cost of equity is 13.60 percent. Flora Fountain also has 6,700 shares of preferred stock with a face value of $100, paying a coupon interest of 6.60 percent and selling in the market for $89.00 per share. The debt's YTM is 7.72 percent, its total nominal value is $368,000 and is priced in the market for 105 percent of its par value. If the tax rate is 35 percent, fi

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

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Imperial Industries has $400,000 in short-term debt and $2.6 million in long-term debt. Their preferred shares sell for $50.00 each, and their are 100,000 shares outstanding. Imperial's common stock sells for $32.00 per share, and there are 1 million shares outstanding. Use these data to calculate the value of Imperial's preferred equity, common equity and Debt . Calculate the value to the nearest dollar.
WhackAmOle has 2 million shares of common stock outstanding, 1.5 million shares of preferred stock outstanding, and 50,000 bonds. If the common shares are selling for $63 per share, the preferred shares are selling for $52 per share, and the bonds are selling for 103 percent of par, what would be the weights used in the calculation of WhackAmOle's WACC?
Masterson, Inc., has 8 million shares of common stock outstanding. The current share price is $74, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $95 million, has a coupon rate of 7 percent, and sells for 97 percent of par. The second issue has a face value of $80 million, has a coupon rate of 6 percent, and sells for 109 percent of par. The first issue matures in 23 years, the second in 6 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant, the book or market value weights?
Masterson, Inc., has 8 million shares of common stock outstanding. The current share price is $82, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $135 million, has a coupon rate of 7 percent, and sells for 93 percent of par. The second issue has a face value of $120 million, has a coupon rate of 6 percent, and sells for 102 percent of par. The first issue matures in 25 years, the second in 9 years. Both bonds make semiannual coupon payments. What are the company's capital structure weights on a book value basis? Equity/Value ___________ Debt/Value ____________ What are the company's capital structure weights on a market value basis? Equity/Value __________ Debt/Value ___________
Hotel Cortez is an all-equity firm that has 6400 shares of stock outstanding at a market price of $17 per share. The firm's management has decided to issue $36000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 9 percent. What is the break-even EBIT
FarCry Industries, a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares sell for $27 per share, the preferred shares sell for $14.50 per share, and the bonds sell for 98 percent of par.What weight should you use for preferred stock in the computation of FarCry’s WACC?
MV Corporation has debt with market value of $95 million, common equity with a book value of $101 million, and preferred stock worth $22 million outstanding. Its common equity trades at $45 per share, and the firm has 5.6 million shares outstanding. What weights should MV Corporation use in its WACC? The preferred stock weight for the WACC calculation is __ % ? (Round to two decimal places.)
Bill's Boards has 6.5 million shares of common stock outstanding, 5.5 million shares of preferred stock outstanding, and 35.00 thousand bonds. If the common shares are selling for $29.60 per share, the preferred share are selling for $18.50 per share, and the bonds are selling for 95.85 percent of par, what would be the weight used for equity in the computation of Bill's WACC?
XYZ Corporation has 45,000 ordinary shares outstanding which are currently selling for 110 per share. The number of preference share outstanding is 30,000 and the book value of a share is $100 while the market value is $105. Company has issued 2500 bonds with face value of 1000. The Market value of bond is higher than the face value and it is $1,100.The required rate of return of ordinary shareholders, preference shareholders and bond holders are 10%, 12% and 15% respectively. The Company is subject to 30% corporate tax.Based on the information given;i. Calculate the market value of the firm ii. Calculate the capital structure weights iii. calculate the Weighted Average Cost of Capital (WACC) of the company
FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 45,000 bonds. Suppose the common shares sell for $28 per share, the preferred shares sell for $15.00 per share, and the bonds sell for 99 percent of par. What weight should you use for preferred stock in the computation of FarCry’s WACC? (Round your answer to 2 decimal places.)
FarCry Industries, a maker of telecommunications equipment, has 2 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10,000 bonds. Suppose the common shares sell for $26 per share, the preferred shares sell for $14.00 per share, and the bonds sell for 97 percent of par.What weight should you use for preferred stock in the computation of FarCry’s WACC? (Round your answer to 2 decimal places.)
Market Basket, Inc., has 125,000 shares of common stock outstanding at a price of $43 a share. They also have 25,000 shares of preferred stock outstanding at a price of $55 a share. There are 10,000, 8 percent bonds outstanding that are priced at $990. The bonds mature in 16 years and pay interest semiannually. What is the capital structure weight of the preferredstock?