Corp. B Taunton Corp. (If information appears to be missing, change the row height to see it.) 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. 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 Question Sheet Answer sheet New 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. 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 $19.90 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. New 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. Use this information to answer the questions on the next spreadsheet tab. AK AM AB AC AD AE AF AG AH Al Requirements: A. Find market values of outstanding bonds, preferred shares and common shares: 1. Bonds: a. What is the market value of each bond? (Enter your answer to two decimal places. (e.g. $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.) $0 $ 0 $ 0 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.) so 3. Common shares: What is the total market value of common shares at Dec 31, 2020 (Round your answer to whole numbers. For example, $1,234,000 not $1.234 million.) B. What weights are assigned to debt, preferred shares and common equity on Dec 31, 2020 (Round all your answers to two decimal places. If you want to enter the number 12.34%, for example, enter 12.34 (not 0.1234) and do not enter the percent sign.) Debt Preferred old Common Op C. Calculate the after-tax cost of the various components of WACC: (Round all your answers to two decimal places. If you want to enter the number 12.34%, 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 dent (using the effective vield-to-maturitul Question Sheet Answer sheet New 5 Clo 7. AB AK AL AM AN AC AD AE AF AG AH AJ (Round all your answers to two decimal places. If you want to enter the number 12.34%, 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). O percent O percent O percent 2. Preferred shares: Opercent 3. Common equity in the form of retained earnings: Opercent O percent 4. Common equity in the form of new shares: D. What is the Weighted Average Cost of Capital if: (Round all your answers to two decimal places. If you want to enter the number 12.34%, 1. the company uses new debt, new preferred shares and just retained earnings? Suppo After-tax Weights Cost Debt percent Pref percent Common percent WACC percent Supporti 2. the company uses new debt, new preferred shares and new common shares? After-tax Question Sheet Answer sheet New WACC percent 2. the company uses new debt, new preferred shares and new common shares? Suppe After-tax Weights Cost Debt Pref Common WACC percent Suppo E. How much of the new capital projects can be funded without using new shareholders? (Enter your answer in whole numbers. For example, $1,234,000 not $1.234 million.) Corp. B Taunton Corp. (If information appears to be missing, change the row height to see it.) 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. 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 Question Sheet Answer sheet New 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. 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 $19.90 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. New 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. Use this information to answer the questions on the next spreadsheet tab. AK AM AB AC AD AE AF AG AH Al Requirements: A. Find market values of outstanding bonds, preferred shares and common shares: 1. Bonds: a. What is the market value of each bond? (Enter your answer to two decimal places. (e.g. $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.) $0 $ 0 $ 0 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.) so 3. Common shares: What is the total market value of common shares at Dec 31, 2020 (Round your answer to whole numbers. For example, $1,234,000 not $1.234 million.) B. What weights are assigned to debt, preferred shares and common equity on Dec 31, 2020 (Round all your answers to two decimal places. If you want to enter the number 12.34%, for example, enter 12.34 (not 0.1234) and do not enter the percent sign.) Debt Preferred old Common Op C. Calculate the after-tax cost of the various components of WACC: (Round all your answers to two decimal places. If you want to enter the number 12.34%, 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 dent (using the effective vield-to-maturitul Question Sheet Answer sheet New 5 Clo 7. AB AK AL AM AN AC AD AE AF AG AH AJ (Round all your answers to two decimal places. If you want to enter the number 12.34%, 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). O percent O percent O percent 2. Preferred shares: Opercent 3. Common equity in the form of retained earnings: Opercent O percent 4. Common equity in the form of new shares: D. What is the Weighted Average Cost of Capital if: (Round all your answers to two decimal places. If you want to enter the number 12.34%, 1. the company uses new debt, new preferred shares and just retained earnings? Suppo After-tax Weights Cost Debt percent Pref percent Common percent WACC percent Supporti 2. the company uses new debt, new preferred shares and new common shares? After-tax Question Sheet Answer sheet New WACC percent 2. the company uses new debt, new preferred shares and new common shares? Suppe After-tax Weights Cost Debt Pref Common WACC percent Suppo E. How much of the new capital projects can be funded without using new shareholders? (Enter your answer in whole numbers. For example, $1,234,000 not $1.234 million.)