Additional Information: i. The Long-Term debt consists of 8% annual coupon bonds, with 15 years to maturity and are currently selling for 95% of par. ii. The company’s common shares which have a book value of $20 per share are currently selling at $25 per share. iii. Preferred shares have a book value of $100 per share. These shares are currently selling at $120 per share and pays dividends of 6% per annum on book value. iv. The dividend growth rate is expected to be 3%, and dividend for 2023 is projected to be $5.00 per share. v. The Company’s Tax rate is 30%. Required: Determine the following for Tram-Ropes Limited: A. Total Market value of the firm’s capital structure B. After-tax Cost of Debt C. Cost of Common Stock D. Cost of Preferred Stock E. WACC
Additional Information: i. The Long-Term debt consists of 8% annual coupon bonds, with 15 years to maturity and are currently selling for 95% of par. ii. The company’s common shares which have a book value of $20 per share are currently selling at $25 per share. iii. Preferred shares have a book value of $100 per share. These shares are currently selling at $120 per share and pays dividends of 6% per annum on book value. iv. The dividend growth rate is expected to be 3%, and dividend for 2023 is projected to be $5.00 per share. v. The Company’s Tax rate is 30%. Required: Determine the following for Tram-Ropes Limited: A. Total Market value of the firm’s capital structure B. After-tax Cost of Debt C. Cost of Common Stock D. Cost of Preferred Stock E. WACC
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Additional Information:
i. The Long-Term debt consists of 8% annual coupon bonds, with
15 years to maturity and are currently selling for 95% of
par.
ii. The company’s common shares which have a book value of $20
per share are currently selling at $25 per share.
iii.
shares are currently selling at $120 per share and pays
dividends of 6% per annum on book value.
iv. The
for 2023 is projected to be $5.00 per share.
v. The Company’s Tax rate is 30%.
Required:
Determine the following for Tram-Ropes Limited:
A. Total Market value of the firm’s capital structure
B. After-tax Cost of Debt
C. Cost of Common Stock
D. Cost of Preferred Stock
E. WACC
Transcribed Image Text:comode is I)
Reference is made to the 2022 Balance Sheet of Tram-Ropes limited.
ol
Cash
Acc.
Tram-Ropes Limited
Balance Sheet 2022
Accounts Payable
Notes Payable
Common to su221 won 6 tiw it gnionent
3,000,000.00
Long-term Debt
1,000,000.00
zaal Receivable bent 12,000,000.00 con
to
Marketable
securities
Inventories
7,500,000.00
nature of Group
Common stock
Fixed Assets
26,500,000.00
8 ei jdeb to 120 ert bos J090190
Total Assets
50,000,000.00
Preferred Stock
Total
8,000,000.00
8,500,000.00
0,000.00
to 3200 9d3 n3
20,000,000.00
7,500,000.00
6,000,000.00
Liabilities and 1910 to 3200 T
Equity vs
the
50,000,000.00 90
260
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