This is a six part question, use the below to answer all six. Smokie Foods, Inc. Balance Sheet As of December, 2020 ASSETS LIABILITIES AND EQUITIES Current Liabilities $ 3,000,000 Bonds Payable (8 % coupon, paid semi-annually 1,000 face value, mature in 10 years) 12,000,000 Preferred Stock (6%, $50 par) 1,500,000 Common Stock ($100 par) 12,000,000 Paidin Capital 4,000,000 ______ Retained Earnings 8,000,000 $40,500,000 $ 40,500,000 Part 1. How many bonds does this company have outstanding? (8 % coupon, $1,000 face value) $12,000,000

a. 1,000

b. 120

c. 1,200

d. 12,000

e. you cannot tell from the information provided

Part 2. Based on information from their investment banker, their currently outstanding bonds (8 % coupon, paid semi-annually 1,000 face value with a maturity of ten years) are selling at a yield to maturity of 10 %.; The price of each outstanding bond is (choose the closest answer):

a. $ 1,000.00

b. $ 877.11

c. $ 875.38

d. $ 489.19

e. $ 1,080.00

Part 3: How many shares of preferred stock are outstanding? (Preferred Stock: 6%, $50 par, $ 1,500,000)

a. 50

b. 300

c. 3,000

d. 30,000

e. 300,000

Part 4: The price per share of the preferred stock should be: (the required return of their preferred stock is 5%.)

a. $ 6.00

b. $ 5.00

c. $ 50.00

d. $ 60.00

e. $ 300.00

Part 5: According to the security line analysis, the rate of return required by stockholders of this company is: (Their common stock has a beta of .8; the risk free rate is 4%; the expected return on the market is 14 %.)

a. 4%

b. 12%

c. 14%

d. 18%

Part 6: When you calculate the cost of capital, current liabilities:

a. should not be included because they should be included in the operating cash flows

b. should be included in the cost of capital

c. they are not a source of financing and do not belong on the balance sheet

d. none of the above