Cash Acc. Receivable Marketable securities Inventories Fixed Assets Total Assets Tram-Ropes Limited Balance Sheet 2022 1,000,000.00 12,000,000.00 3,000,000.00 7,500,000.00 26,500,000.00 50,000,000.00 Accounts Payable Notes Payable Long-term Debt v. The Company's Tax rate is 30%. Common stock Preferred Stock Total Liabilities and Equity 8,000,000.00 8,500,000.00 20,000,000.00 7,500,000.00 6,000,000.00 50,000,000.00 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.
Cash Acc. Receivable Marketable securities Inventories Fixed Assets Total Assets Tram-Ropes Limited Balance Sheet 2022 1,000,000.00 12,000,000.00 3,000,000.00 7,500,000.00 26,500,000.00 50,000,000.00 Accounts Payable Notes Payable Long-term Debt v. The Company's Tax rate is 30%. Common stock Preferred Stock Total Liabilities and Equity 8,000,000.00 8,500,000.00 20,000,000.00 7,500,000.00 6,000,000.00 50,000,000.00 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.
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
Related questions
Question
please show step by step workings for question b. No excel formulas please.
Transcribed Image Text:Reference is made to the 2022 Balance Sheet of Tram-Ropes limited.
Tram-Ropes Limited
Balance Sheet 2022
Cash
Acc.
Receivable
Marketable
securities
Inventories
Fixed Assets
Total Assets
1,000,000.00
12,000,000.00
3,000,000.00
7,500,000.00
26,500,000.00
50,000,000.00
Accounts Payable
Notes Payable
Long-term Debt
Common stock
v. The Company's Tax rate is 30%.
Preferred Stock
Total
Liabilities and
Equity
8,000,000.00
8,500,000.00
20,000,000.00
7,500,000.00
6,000,000.00
50,000,000.00
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.
Transcribed Image Text: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
Expert Solution
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Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Define Cost of Capital
VIEWStep 2: Computation of the total market value of firm's capital structure.
VIEWStep 3: Computation of after tax cost of debt
VIEWStep 4: Computation of Cost of Equity
VIEWStep 5: Computation of Cost of Preference Stock
VIEWStep 6: Computation of Weighed Average cost of capita
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