Lingenburger Cheese Corporation has 6.4 million shares of common stock outstanding, 225.000 shares of 3.7 percent preferredstock outstanding, par velue of $100, and 110 000 bonds with a semiannual coupon rate of 5.4 percent outstanding, par value$1,000 eech. The common stock currently sells for $72 per share and has e beta of 1.20, the areferred stock has a per value of$100 and currently sells for $84 per share, and the bonds have 18 yeers to maturity and sell for 108 percent of per. The marketrisk premiam is 7.2 percent, Tolls are yielung 32 percent, end the company's tex rate is 24 percenta. What is the firm's market value capital structure?Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 1616.b. If the company is evelueting a new investment project that has the same risk as the firm's typical project, what rate should thefirm use to discount the project's cash flows?Note: Do not round intermediate calculations enter your answer as a percent rounded to 2 decimal places, .g., 32.16.a. DobPreferred stockEquityb. Discount rale

1.Market Value Capital Structure: - Calculate the market value of common stock: $$\text{Market…

Answered: Lingenburger Cheese Corporation has 6.4…

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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es Lingenburger Cheese Corporation has 6.6 million shares of common stock outstanding, 235,000 shares of 3.9 percent preferred stock outstanding, par value of $100; and 120,000 bonds with a semiannual coupon rate of 5.6 percent outstanding, par value $1,000 each. The common stock currently sells for $70 per share and has a beta of 1.10, the preferred stock has a par value of $100 and currently sells for $86 per share, and the bonds have 15 years to maturity and sell for 104 percent of par. The market risk premium is 7.4 percent, T-bills are yielding 3.4 percent, and the company's tax rate is 21 percent. a. What are the firm's market value capital structure weights? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? Note: Do not round intermediate calculations…
Bill's Boards has 6.3 million shares of common stock outstanding, 5.3 million shares of preferred stock outstanding, and 33.00 thousand bonds. If the common shares are selling for $29.40 per share, the preferred share are selling for $18.30 per share, and the bonds are selling for 95.87 percent of par, what would be the weight used for common stock in the computation of Bill's WACC? 33.33% 66.67% 54.16% 59.02%
Lingenburger Cheese Corporation has 7.2 million shares of common stock outstanding, 260,000 shares of 4.4 percent preferred stock outstanding, par value of $100; and 145,000 bonds with a semiannual coupon rate of 5.5 percent outstanding, par value $2,000 each. The common stock currently sells for $65 per share and has a beta of 1.15, the preferred stock has a par value of $100 and currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 105 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 3.1 percent, and the company's tax rate is 21 percent. a. What are the firm's market value capital structure weights? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? Note: Do not round intermediate calculations…
Lingenburger Cheese Corporation has 6.3 million shares of common stock outstanding, 220,000 shares of 3.6 percent preferred stock outstanding, par value of $100; and 105,000 bonds with a semiannual coupon rate of 5.3 percent outstanding, par value $1,000 each. The common stock currently sells for $73 per share and has a beta of 115, the preferred stock has a par value of $100 and currently sells for $83 per share, and the bonds have 17 years to maturity and sell for 107 percent of par. The market risk premium is 7.1 percent, T-bills are yielding 3.1 percent, and the company's tax rate is 23 percent. a. What is the firm's market value capital structure? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? Note: Do not round intermediate calculations enter your…
Lingenburger Cheese Corporation has 6.5 million shares of common stock outstanding, 230,000 shares of 3.8 percent preferred stock outstanding, par value of $100; and 115,000 bonds with a semiannual coupon rate of 5.5 percent outstanding, par value $1,000 each. The common stock currently sells for $71 per share and has a beta of 1.05, the preferred stock has a par value of $100 and currently sells for $85 per share, and the bonds have 19 years to maturity and sell for 109 percent of par. The market risk premium is 7.3 percent, T-bills are yielding 3.3 percent, and the company's tax rate is 25 percent. a. What is the firm's market value capital structure? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? Note: Do not round intermediate calculations enter your…
Consider the following book value balance sheet of ABC, in which all figures are in million dollars. The preferred stock currently sells for $15 per share and the common stock for $20 per share. There are 1 million common shares outstanding. Assets Liabilities and Net Worth Cash and short-term securities $1 Bonds with coupon rate of 8% paid annualy, maturity of 10 years and the current yield to maturity of 9% $10 Account receivables $3 Preferred stock (par value $10 per share) $2 Inventories $7 Common stock $10 Plant and equipment $21 Retained earnings $10 Total $32 $32 a) What is the capital structure of the firm based on market values? b) The preferred stock pays a dividend of $2 per share, the beta of the common stock is 1.5, the market risk premium is 7%, the risk-free rate is 4%, and the firm’s tax rate is 40%. ABC’s bonds have coupon rate of 6%, and currently are trading at par. What is the firm’s weighted average cost of capital (WACC)?…
Filer Manufacturing has 5,766,872 shares of common stock outstanding. The current share price is $36.05, and the book value per share is $7.08. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $64,298,817, has a 0.05 coupon, matures in 10 years and sells for 83 percent of par. The second issue has a face value of $48,100,600, has a 0.06 coupon, matures in 20 years, and sells for 92 percent of par. The most recent dividend was $2.78 and the dividend growth rate is 0.05. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 0.35. What is Filer's aftertax cost of debt? Enter the answer with 4 decimals (e.g. 0.2345)
Carrie D's has 5.9 million shares of common stock outstanding, 2.9 million shares of preferred stock outstanding, and 19.00 thousand bonds. If the common shares are selling for $29.00 per share, the preferred share are selling for $28.90 per share, and the bonds are selling for 108.91 percent of par, what would be the weight used for common stock in the computation of Carrie D's WACC? 66.90% 33.33% 66.67% 62.08%
Filer Manufacturing has 5,321,196 shares of common stock outstanding. The current share price is $52.83, and the book value per share is $9.19. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $43,973,360, has a 0.05 coupon, matures in 12 years and sells for 93 percent of par. The second issue has a face value of $50,007,464, has a 0.07 coupon, matures in 20 years, and sells for 89 percent of par. What is Filer's weight of debt on a market value basis? Enter the answer with 4 decimals (e.g. 0.2345)
Give typing answer with explanation and conclusion Garfield and Moore has 130,000 shares of common stock outstanding at a price per share of $41.20. There are 12,000 shares of preferred stock outstanding at a price of $58 a share. The firm also has 2,500 bonds outstanding that are currently selling at par. Each bond has a $1,000 face value. What weight should be assigned to the preferred stock when computing this firm's WACC? 0.21 0.08 0.12 0.16
Filer Manufacturing has 4,308,744 shares of common stock outstanding. The current share price is $42.19, and the book value per share is $9.71. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $46,309,431, has a 0.08 coupon, matures in 8 years and sells for 82 percent of par. The second issue has a face value of $41,779,016, has a 0.06 coupon, matures in 20 years, and sells for 80 percent of par. What is Filer's weight of debt on a market value basis? Enter the answer with 4 decimals (e.g. 0.2345)
Lingenburger Cheese Corporation has 7.4 million shares of common stock outstanding, 270,000 shares of 4.6 percent preferred stock outstanding, par value of $100; and 155,000 bonds with a semiannual coupon rate of 5.5 percent outstanding, par value $2,000 each. The common stock currently sells for $63 per share and has a beta of 1.05, the preferred stock has a par value of $100 and currently sells for $93 per share, and the bonds have 17 years to maturity and sell for 107 percent of par. The market risk premium is 7.3 percent, T-bills are yielding 3.3 percent, and the company's tax rate is 23 percent. a. What are the firm's market value capital structure weights? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? Note: Do not round intermediate calculations…

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