FINS1613 Study Guide - Quiz Guide: Retained Earnings, Net Present Value, Sunk Costs
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The Patrick Company's year-end balance sheet is shown below. Its cost of common equity is 17%, its before-tax cost of debt is 10%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firm has 576 shares of common stock outstanding that sell for $4.00 per share. Calculate Patrick's WACC using market value weights. Round your answer to two decimal places.
Assets | Liabilities And Equity | |||
Cash | $ 120 | |||
Accounts receivable | 240 | |||
Inventories | 360 | Long-term debt | $1,324 | |
Plant and equipment, net | 2,160 | Common equity | 1,556 | |
Total assets | $2,880 | Total liabilities and equity | $2,880 |
Calculate Patrick's WACC using market value weights. Round your answer to two decimal places.
Bonaime, Inc., has 6.8 million shares of common stock outstanding. The current share price is $61.80, and the book value per share is $4.80. The company also has two bond issues outstanding. The first bond issue has a face value of $70.8 million, a coupon rate of 7.3 percent, and sells for 94 percent of par. The second issue has a face value of $35.8 million, a coupon rate of 7.3 percent, and sells for 93 percent of par. The first issue matures in 19 years, the second in 11 years.
a. What are the companyâs capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)
Book value weight of equity??? | |
Book value weight of debt??? | |
b. What are the companyâs capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)
Market value weight of equity??? | |
Market value weight of debt??? | |
c. Which are more relevant, the book or market value weights?
(Click to select) Market value weights or Book value weights???