Suppose the Schoof Company has this book value balance sheet: Current assets $30

Question

Suppose the Schoof Company has this book value balance sheet: Current assets $30,000,000 Current liabilities $10,000,000 Notes payable 10,000,000 Fixed assets 50,000,000 Long-term debt 20,000,000 Common stock (1 million shares) 1,000,000 Retained earnings 39,000,000 Total assets $80,000,000 Total claims $80,000,000 The current liabilities consist entirely of notes payable to banks, and the interest rate on this debt is 8%, 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 interest rate of 6%, and a 15-year maturity. The going rate of interest on new long-term debt, rd, is 10%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $54 per share. Calculate the firm's market value capital structure. Do not round intermediate computations, it will change the answer. Calculate the following for BOTH dollar and percentage amounts. Thanks!

Short-term debt = ___% and $____

Long-term debt = ___% and $____

Common equity= ___% and $____

Total capital = ___% and $____

Explanation / Answer

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% $ Calculation Short-term debt   11.78% 10,000,000.00 Given Long-term debt   24.60% 20,878,704.59 FV = 30000000 , N 15 , PMT 1800000 , IY 10% CPT PV Common equity 63.62% 54,000,000.00 54 * 1 MIL Total capital   100.00% 84,878,704.59

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