BLiabilities and Owners' CapitalCurrent LiabilitiesAccounts payableNotes payableOther current liabilities)Total current liabilitiesLong-term debt (7.5% interest paid semianually.due in 2012)Total liabilitiesOwners' CapitalCommon stock ($1 par value per share)Paid-in-capitalAccumulated earningsTotal owners' capitalTotal liabilities and owners' capitalUS Treasury Bond YieldEstimated Market or Equity Risk PremiumCurrent Share PriceMarket value of owners' equityCurrent yield on the firm's long-term debtCurrent yield on the firm's short-term notesDollar value of short term notes outstandingCorporate tax ratea. What are Harriston's capital structure weights?Enterprise value = Market capitalization + DebtNotes payable / Enterprise ValueLong-Term Debt/ Enterprise ValueEquity / Enterprise Value$$$55$$$CPROBLEM 4-12GivenDecember 31, 2014Balance Sheet(Book Values)17,550,00020,000,00022,266,00059,816,000 S5.42%5.00%78.00DInvested Capital(Market Values)8.50%9.00%20,000,00035%650,000,000 $624,385,826709,816,000 $ 644,385,826Solution20,000,00020,000,000200,025,000255,000,000475.025,000 $ 1.560,000,0001,184.841,000 $2,204.385,82620,000,000EF 5A41083286658 64214344454547due in 2012)49Total liabilities61Owners' CapitalCommon stock ($1 par value per share)Paid-in-capitalAccumulated earningsX XV fxBTotal owners' capitalTotal liabilities and owners' capitalUS Treasury Bond YieldEstimated Market or Equity Risk PremiumCurrent Share PriceMarket value of owners' equityCurrent yield on the firm's long-term debtCurrent yield on the firm's short-term notesDollar value of short term notes outstandingCorporate tax ratea. What are Harriston's capital structure weights?Enterprise value = Market capitalization - DebtNotes payable / Enterprise ValueLong-Term Debt/ Enterprise ValueEquity/Enterprise ValueSource of CapitalNotes PayableLong-term DebtEquityNotes Payable (after-taxes)Long-term Debt (after-taxes)Levered equity betaEquity (using the CAPM)c. What is Harriston's WACC?SS$$ریSS$b. What is Harriston's cost of equity capital using the CAPM?After-Tax Cost of Sources of Capital$C650,000,000 $709.816.000 $20.000.000200,025,000255,000,000475,025,000 $1,560,000,0001,184,841,000 $2,204.385 8265.42%5.00%78.008.50%9.00%20,000,00035%SolutionD624,385,826644,385,825Capital Structure Weight(Proportion)1.20After-Tax CostWACCEWeighted After-Tax Cost

Harriston's capital structure weights. Harriston's cost of equity capital using the CAPM Harriston's…

Liabilities and Owners' Capital Current Liabilities Accounts payable Notes payable Other current liabilities Total current liabilities Long-term debt (7.5% interest paid semianually. due in 2012) Total liabilities Owners' Capital Common stock ($1 par value per share) Paid-in-capital Accumulated earnings Total owners' capital Total liabilities and owners' capital US Treasury Bond Yield Estimated Market or Equity Risk Premium Current Share Price Market value of owners' equity Current yield on the firm's long-term debt Current yield on the firm's short-term notes Dollar value of short term notes outstanding Corporate tax rate a. What are Harriston's capital structure weights? Enterprise value = Market capitalization + Debt- Notes payable / Enterprise Value Long-Term Debt/ Enterprise Value Equity / Enterprise Value $ $ $ $ $ PROBLEM 4-12 Given December 31, 2014 Balance Sheet (Book Values) 17,550,000 20,000,000 22,266,000 59.816,000 $ Invested Capital (Market Values) 5.42% 5.00% 78.00 650,000,000 $ 624,385,826 709,816,000 $ 644,385,8261 8.50% 9.00% 20.000.000 35% 20,000,000 20,000,000 200,025,000 255,000,000 475.025,000 $ 1,560,000,000 1,184 841,000 $2,204.385,826 Solution 20,000,000

Liabilities and Owners' Capital Current Liabilities Accounts payable Notes payable Other current liabilities Total current liabilities Long-term debt (7.5% interest paid semianually. due in 2012) Total liabilities Owners' Capital Common stock ($1 par value per share) Paid-in-capital Accumulated earnings Total owners' capital Total liabilities and owners' capital US Treasury Bond Yield Estimated Market or Equity Risk Premium Current Share Price Market value of owners' equity Current yield on the firm's long-term debt Current yield on the firm's short-term notes Dollar value of short term notes outstanding Corporate tax rate a. What are Harriston's capital structure weights? Enterprise value = Market capitalization + Debt- Notes payable / Enterprise Value Long-Term Debt/ Enterprise Value Equity / Enterprise Value $ $ $ $ $ PROBLEM 4-12 Given December 31, 2014 Balance Sheet (Book Values) 17,550,000 20,000,000 22,266,000 59.816,000 $ Invested Capital (Market Values) 5.42% 5.00% 78.00 650,000,000 $ 624,385,826 709,816,000 $ 644,385,8261 8.50% 9.00% 20.000.000 35% 20,000,000 20,000,000 200,025,000 255,000,000 475.025,000 $ 1,560,000,000 1,184 841,000 $2,204.385,826 Solution 20,000,000

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 51CE: Debt Management and Short-Term Liquidity Ratios The following items appear on the balance sheet of...

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