Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Calculate the proportions to be used in calculating an average cost of capital for each of the following sets of data on different

image

1. Calculate the proportions to be used in calculating an average cost of capital for each of the following sets of data on different firms. Bonds Preferred stock Common stock c) Bond price $95 per $100 maturity value Balance sheet data $10 million maturity value $ 1 million par value $ 8 million book value Preferred stock price Common stock price (There are 1 million shares of common stock outstanding.) $100 per $100 par value $10.50 per share b) There are two types of securities outstanding for the firm-bonds with a maturity value of $4 million and 200,000 shares of common stock. The current market price for the bonds is $127 per $100 ` maturity value, and the price of the stock is $25 per share. d) Bonds (7%) Common stock (100,000 shares at $10 par value) Surplus Retained earnings Balance sheet data Total Equity Market price for bonds $90.00 Market price for stock = $160.00 Common stock Preferred stock Long-term debt Balance sheet dala Long-term debt Preferred stock ($100 par) Book value of common stock Market value $ 9.5 million $ 1.0 million $10.5 million Other data $10 million $ 1.0 million 2.5 million 6.0 million $ 9.5 million $5 million $1 million $6 million 1.5 million shares outstanding; current price = $20 per share Current price $80 per $100 par. These securities are not traded and no market prices are available. However, the debt is recently issued, and the interest rates being paid by the firm are approxi- mately equal to current market rates.

Step by Step Solution

3.53 Rating (153 Votes )

There are 3 Steps involved in it

Step: 1

To calculate the proportion of each type of capital for the purpose of calculating the average cost of capital for each firm you need to determine the ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting Reporting and Analysis

Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach

2nd edition

9781305727557, 1285453824, 9781337116619, 130572755X, 978-1285453828

More Books

Students also viewed these Finance questions

Question

What is the core principle of revenue recognition?

Answered: 1 week ago