Solid Structures, Inc., a manufacturer of steel wire reinforcements and pre-stressed concrete strands for the concrete construction industry, wants to determine its WACC. Today, 1/1/2018, the firm issued 7,000 bonds that will mature in 1/1/2038 with $1,000 face value. These bonds will pay a 9% coupon rate semiannually and are currently selling for $950. The firm has 100,000 preferred shares of stock outstanding with a book value of $40, but currently selling for $50 per share. The most recent preferred and common dividends were $3.50 and $2.50 per share, respectively. The firm’s EPS five years ago was $8.00 and it expects to increase its next dividend payment by the implied 5-year earnings per share growth rate. Flotation costs on debt and preferred equity are both 3%, but 7% in the case of common stocks. The common stock is selling today for $25 and the firm’s tax rate and payout ratio are 40% and 25%, respectively. The firm has 200,000 shares of common stock outstanding, each share having the same book value as that of its preferred stock.

1. Use the above-provided information to fill out the majority of the cells found in rows 2-26 and in B32:B34.

2. Calculate the book value and market value weights for each source of capital in the respective cells found in rows 32-34. Then fill out row 35's highlighted cells.

3. Calculate the component costs of capital (i.e., debt, preferred equity, retained earnings, and new common equity) in the remaining empty cells found in the range of rows 11-29.

4. Fill out the respective cells in the last table on the left by calculating the WACC using both the market and the book value weights.

 

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A B D 1 Solid Structures, Inc. Solid Structures, Inc., a manufacturer of steel wire reinforcem 2 Tax Rate (X) stressed concrete strands for the concrete construction indus determine its WACC. Today, 1/1/2018, the firm iasued 7,000 mature in 1/1/20s8 with $1,000 face value. These bends will coupon rate semiannually and are currently selling for $a50. 3 Bonds Settlement Dste 5 Maturity Date Frequency Face Value ($) Coupon Rate (X) Selling Price ($) Flotation Costa on Debt (in %) Yield to Maturity 4 100,000 preferred shares of stock outstanding with a book va currently selling for $50 per share. The most recent preferred dividends were $3.50 and $2.50 per share, respectively. The f years ago was $8.00 and it espects to increase its next divider the implied 5-year earnings per share growth rate. Fletatione and preferred equity are both 3%, but 7% in the case of comm The common stock is selling today for $25 and the firm's tax payout ratio are 40% and 25, respectively. The firm has 200 common stock outitanding, each share having the same bok of its preferred stock. 10 11 12 After-tax Cost of Debt () 13 Preferreds Flotation Costs on Preferred (8) Preferred Dividend ($) Preferred Book Value ($) Preferred Price ($) Flotation Costs on Preferreds (X) Cost of Proferred Equity (8) 14 1. Use the above-provided information to fil out the majority 15 found in rows 2-26 and in 832 834. 2. Cakulute the boak value and market value weights lor each capital in the respective cells found in rows 32-34. Then fil ou highlighted celis. 3. Calculate the component costs ofcapital (i., debt, prefere retained earnings, and new comman equity) in the remaining found in the range of rows 11-29. 4. Fil out the respective celk in the last table an the left by cak WACC using both the market and the book value weights. 16 17 18 19 20 Common Stock 21 Last Common Dividend (D1) ($) 22 EPS 5 Years Ago ($) 23 Common Stock Book Value ($) 24 Price on Common Share ($) 25 Payout Ratio (X) 26 Flotation Costs on Common Stock (X) 27 Implied Growth Rate (X) 28 Cost of Retained Earnings (%) 29 Cost of New Common Equity (%) 30 31 Source Reantit Book Valudarket Valu:Y VeiqbtAY Veiqbt 32 Common stock 33 Preferreds 34 Debt 35 Totala 36 VACC (2) 38 Book Valee Veights: With Retained Earnings With New Common Equity Market Value Weights: With Retained Earnings With Now Common Equity 37 39 40 41 42 43 A B D 1 Solid Structures, Inc. Solid Structures, Inc., a manufacturer of steel wire reinforcem 2 Tax Rate (X) stressed concrete strands for the concrete construction indus determine its WACC. Today, 1/1/2018, the firm iasued 7,000 mature in 1/1/20s8 with $1,000 face value. These bends will coupon rate semiannually and are currently selling for $a50. 3 Bonds Settlement Dste 5 Maturity Date Frequency Face Value ($) Coupon Rate (X) Selling Price ($) Flotation Costa on Debt (in %) Yield to Maturity 4 100,000 preferred shares of stock outstanding with a book va currently selling for $50 per share. The most recent preferred dividends were $3.50 and $2.50 per share, respectively. The f years ago was $8.00 and it espects to increase its next divider the implied 5-year earnings per share growth rate. Fletatione and preferred equity are both 3%, but 7% in the case of comm The common stock is selling today for $25 and the firm's tax payout ratio are 40% and 25, respectively. The firm has 200 common stock outitanding, each share having the same bok of its preferred stock. 10 11 12 After-tax Cost of Debt () 13 Preferreds Flotation Costs on Preferred (8) Preferred Dividend ($) Preferred Book Value ($) Preferred Price ($) Flotation Costs on Preferreds (X) Cost of Proferred Equity (8) 14 1. Use the above-provided information to fil out the majority 15 found in rows 2-26 and in 832 834. 2. Cakulute the boak value and market value weights lor each capital in the respective cells found in rows 32-34. Then fil ou highlighted celis. 3. Calculate the component costs ofcapital (i., debt, prefere retained earnings, and new comman equity) in the remaining found in the range of rows 11-29. 4. Fil out the respective celk in the last table an the left by cak WACC using both the market and the book value weights. 16 17 18 19 20 Common Stock 21 Last Common Dividend (D1) ($) 22 EPS 5 Years Ago ($) 23 Common Stock Book Value ($) 24 Price on Common Share ($) 25 Payout Ratio (X) 26 Flotation Costs on Common Stock (X) 27 Implied Growth Rate (X) 28 Cost of Retained Earnings (%) 29 Cost of New Common Equity (%) 30 31 Source Reantit Book Valudarket Valu:Y VeiqbtAY Veiqbt 32 Common stock 33 Preferreds 34 Debt 35 Totala 36 VACC (2) 38 Book Valee Veights: With Retained Earnings With New Common Equity Market Value Weights: With Retained Earnings With Now Common Equity 37 39 40 41 42 43