urrent assets xed assets $30,000,000 70,000,000 Current liabilities Notes payable $100,000,000 Long-term debt Common stock (1 million shares) Retained earnings Total liabilities and equity $20,000 10,000 30,000 1,000 39,000 $100,000 otal assets he notes payable are to banks, and the interest rate on this debt is 9%, the same as the rate on new bank loa hese bank loans are not used for seasonal financing but instead are part of the company's permanent capital
urrent assets xed assets $30,000,000 70,000,000 Current liabilities Notes payable $100,000,000 Long-term debt Common stock (1 million shares) Retained earnings Total liabilities and equity $20,000 10,000 30,000 1,000 39,000 $100,000 otal assets he notes payable are to banks, and the interest rate on this debt is 9%, the same as the rate on new bank loa hese bank loans are not used for seasonal financing but instead are part of the company's permanent capital
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter9: The Cost Of Capital
Section: Chapter Questions
Problem 16P: Suppose the Schoof Company has this book value balance sheet: The notes payable are to banks, and...
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![Suppose the Schoof Company has this book value balance sheet:
$30,000,000
Current assets
Fixed assets
Total assets
Short-term debt
Long-term debt
Common equity
Total capital
$
70,000,000
$
$100,000,000
Current liabilities
Notes payable
The notes payable are to banks, and the interest rate on this debt is 9%, the same as the rate on new bank loans.
These bank loans are not used for seasonal financing but instead are part of the company's permanent capital
structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon
nterest rate of 7%, and a 25-year maturity. The going rate of interest on new long-term debt, rd, is 12%, and this
s the present yield to maturity on the bonds. The common stock sells at a price of $60 per share. Calculate the
firm's market value capital structure. Do not round intermediate calculations. Round the monetary values to the
nearest dollar and percentage values to two decimal places.
Long-term debt
Common stock (1 million shares)
Retained earnings
Total liabilities and equity
%
$20,000,000
10,000,000
30,000,000
1,000,000
39,000,000
$100,000,000
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff2fbecd9-8350-433e-8635-7f106c0566b5%2F5ce997dd-4cf6-4677-9a63-3d2ef26bf0bc%2Fjbtsfsf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose the Schoof Company has this book value balance sheet:
$30,000,000
Current assets
Fixed assets
Total assets
Short-term debt
Long-term debt
Common equity
Total capital
$
70,000,000
$
$100,000,000
Current liabilities
Notes payable
The notes payable are to banks, and the interest rate on this debt is 9%, the same as the rate on new bank loans.
These bank loans are not used for seasonal financing but instead are part of the company's permanent capital
structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon
nterest rate of 7%, and a 25-year maturity. The going rate of interest on new long-term debt, rd, is 12%, and this
s the present yield to maturity on the bonds. The common stock sells at a price of $60 per share. Calculate the
firm's market value capital structure. Do not round intermediate calculations. Round the monetary values to the
nearest dollar and percentage values to two decimal places.
Long-term debt
Common stock (1 million shares)
Retained earnings
Total liabilities and equity
%
$20,000,000
10,000,000
30,000,000
1,000,000
39,000,000
$100,000,000
%
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