Travellers Inn (Millions of Dollars)Cash$ 10Accounts payable$ 10Accounts20Accruals15receivableInventories20Short-term debtCurrent assets$ 50Current liabilities$ 25Net fixed assets50Long-term debt30Preferred stock (50,000 shares)5Common equityCommon stock (3,800,000 shares)$ 10Retained earnings30Total common equity$ 40Total assets$100Total liabilities and equity$100The following facts also apply to TII:1. The long-term debt consists of 29,412 bonds, each having a 20-year maturity, semiannual payments, a couponrate of 7.8%, and a face value of $1,000. Currently, these bonds provide investors with a yield to maturity of11.8%. If new bonds were sold, they would have an 11.8% yield to maturity.2. TII's perpetual preferred stock has a $100 par value, pays a quarterly dividend per share of $2, and has a yieldto investors of 8%. New perpetual preferred stock would have to provide the same yield to investors, and thecompany would incur a 3.55% flotation cost to sell it.3. The company has 3.8 million shares of common stock outstanding, a price per share = Po$20, dividend pershare =Do = $1, and earnings per shareEPSO$5. The return on equity (ROE) is expected to be 8%.4. The stock has a beta of 1.6. The T-bond rate is 5%, and RPM is estimated to be 5%.5. TII's financial vice president recently polled some pension fund investment managers who hold TII's securitiesregarding what minimum rate of return on TII's common would make them willing to buy the common ratherthan TII bonds, given that the bonds yielded 11.8%. The responses suggested a risk premium over TII bonds of3 percentage points.6. TII is in the 25% federal-plus-state tax bracket. Assume that you were recently hired by TII as a financial analyst and that your boss, the treasurer, has asked you toestimate the company's WACC under the assumption that no new equity will be issued. Your cost of capital shouldbe appropriate for use in evaluating projects that are in the same risk class as the assets TII now operates. Basedon your analysis, answer the following questions. Do not round intermediate calculations. Round your answers totwo decimal places.a. What are the current market value weights for debt, preferred stock, and common stock? (Hint: Do your work indollars, not millions of dollars.)WeightDebt%Preferred stock%Common stock%b. What is the after-tax cost of debt?%c. What is the cost of preferred stock?%d. What is the required return on common stock using CAPM?%e. Use the retention growth equation to estimate the expected growth rate. Then use the expected growth rate andthe dividend growth model to estimate the required return on common stock.%f. What is the required return on common stock using the own-bond-yield-plus-judgmental-risk-premium approach?%g. Use the required return on stock from the CAPM model, and calculate the WACC.%

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Answered: $ 10 Accounts payable $ 10 unts 20…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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Preferred shares, $4.55 non-cumulative, 52,000 shares authorized and issued* $ 3,328,000 Common shares, 87,000 shares authorized and issued* 1,392,000 Required:Part A1. Calculate the total dividends paid in each year to the preferred and to the common shareholders.
The Tyler Oil Company's capital structure is as follows: Debt Preferred stock Common equity 15% 20 65 The aftertax cost of debt is 5 percent; the cost of preferred stock is 8 percent; and the cost of common equity (in the form of retained earnings) is 11 percent. Calculate Tyler Oil Company's weighted average cost of capital in a manner similar to Table 11-1. (Round the final answers to 2 decimal places.) Debt (Kd) Preferred stock (Kp) Common equity (Ke) (retained earnings) Weighted average cost of capital (Ka) Weighted Cost % 9.50 %
When 30,000 shares of $10 par - value common stock are issued at $30 per share, Paid - In Capital in Excess of Par, Common Stock is credited for: $300,000 $30,000 $600,000 $900,000
Alina Corp: Common Stock, $1 par $4,000,000 Paid in Capital-Common Stock $500,000 Preferred stock $1,500,000 Paid in capital-Preferred stock $450,000 Retained Earnings $4,750,000 Treasury Stock at cost $400,000 a. How much is the total paid-in capital (cash collected) related to common stock?
The following figures have been extracted from the financial statements of KND Ltd: Book Value of Current Assets $45 million and Current Liabilities $34.75 million 11% Debentures: $27 million debentures issued at $1,000. Long-term Loan: $7.18 million Preference Share Capital: 8.8 million shares issued at $2 per share Retained Earnings: $28.30 million Ordinary Share Capital: 39 million shares issued at $1 per share General Reserves $9.20 million The following additional information has been provided by the manager of the company: Government bonds are currently yielding 6.3% per annum. The current market return on equity is estimated to be 13.5% per annum. Debenture coupons are paid annually, with 16 years to maturity. The company tax rate is 34%. The loan requires a 9% p.a. interest payment, compounded monthly. A merchant banker suggests that KND Ltd would have to offer a rate of 13.9% p.a. on any new issue of 16-year debentures. 12% Preference shares of KND Ltd are currently…
1 Following is the Balance sheet of Jay Limited: Liabilities Equity Shares of Rs. 10 each Retained Earnings } VESHUR 6% Preference Share of Rs.10 each General Reserve Debenture Redemption Fund 5% Debentures Sundry Creditors Total Liabilities Amoun Required: Calculate value per share by using following 1. Yield Method 2. Net Assets Method t 300,000 200000 Assets Fixed Assets Allowances for Depreciation 21 13303 90,000 880,000 200,000 Current assets 5,000 Preliminary Expenses Unwritten Off Discount 25,000 60,000 Amoun t 600,000 (75,000) 340,000 10,000 5,000 Total Assets Current Assets include investments of Rs.50,000 market price of which is Rs.90,000. Debtors included in current assets are doubtful to the extent of Rs.25,000 for which no provision has been made so far. Debenture interest owes for two years and preference dividends are in arrear for two years. Earnings before tax is Rs.280,000 and Tax rate is 35%. The normal rate of dividend is 20%. 880,000
You have the following balance sheet and information about FedEx: Balance Sheet: Assets Liabilities & Shareholders’ Equity Current Assets $31,000,000 Current Liabilities $28,000,000 PP&E $197,000,000 Long-term Debt (Corporate Bonds) $105,000,000 Equity $95,000,000 Total $228,000,000 Total $228,000,000 FedEx has 16 million shares outstanding. FedEx’s shares have a beta of 1.6 and are currently trading for $15 per share. The expected market risk premium is 7%. The risk-free rate is 1%. The debt is trading at 101% of book value. The coupon rate on existing debt is 5% The yield to maturity on existing debt is 3%. The corporate tax rate is 21%. Compute FedEx’s weighted-average cost of capital (WACC).
Computer for: Equity value and enterprise value
The McLaughlin Corporation declared a 6 percent stock dividend. Construct a pro forma balance sheet showing the effect of this action. The stock was selling for $37.50 per share, and a condensed version of McLaughlin's balance sheet as of December 31, 2008, before the dividend, follows ($ millions):
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Long-term debt Notes payable, 11% 8% convertible bonds payable 11% bonds payable Total long-term debt Shareholders' equity Preferred stock, 6% cumulative, $50 par value, 108,000 shares authorized, 27,000 shares issued and outstanding Common stock, $1 par, 10,200,000 shares authorized, 1,020,000 shares issued and outstanding Additional paid-in capital Retained earnings Total shareholders' equity The following transactions have also occurred at Cheyenne. $980,000 4,910,000 5,910,000 $11,800,000 $1,350,000 1,020,000 3,970,000 6,050,000 $12,390,000 1. Options were granted on July 1, 2019, to purchase 180,000 shares at $15 per share. Although no options were exercised during fiscal year 2020, the average price per common share during fiscal year 2020 was $20 per share. 2. Each bond was issued at face value. The 8% convertible bonds will convert into common stock at 50 shares per $1,000 bond. The bonds are exercisable after 5 years and were issued in fiscal year 2019. 3. The preferred stock…
A company issued 220 shares of $100 par value common stock for $26,200 cash. The total amount of paid-in capital in excess of par is: Multiple Choice $100. $2,200. $4,200. 633 PM 3/28/2022

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$ 10 Accounts payable $ 10 unts 20 Accruals 15 vable ntories 20 Short-term debt rrent assets $ 50 Current liabilities $ 25 ixed assets 50 Long-term debt 30 Preferred stock (50,000 shares) Common equity Common stock (3,800,000 shares) $ 10