Question: How would I put this into a BAII Plus (Finance) Calculator and solve it? In order to accurately assess the capital structure of a firm,
How would I put this into a BAII Plus (Finance) Calculator and solve it?
In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today is as follows:
| Long-term debt (bonds, at par) | $10,000,000 |
| Preferred stock | 2,000,000 |
| Common stock ($10 par) | 10,000,000 |
| Retained earnings | 4,000,000 |
| Total debt and equity | $26,000,000 |
The bonds have a 4.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?
a. $5,276,731
b. $5,412,032
c. $5,547,332
d. $7,706,000
e. $7,898,650
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