Lingenburger Cheese Corporation has 6.4 million shares of common stock outstanding. 320,000 shares of 4.65 percent preferred stock outstanding, par value of $100, and 73,000 5.6 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $74.25 per share and has a beta of 1.14, the preferred stock currently sells for $101.60 per share, and the bonds have 23 years to maturity and sell for 96.1 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 3.4 percent, and the firm's tax rate is 25 percent. 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. Market value weight of debt Market value weight of preferred stock Market value weight of equity What is the firm's cost of each form of financing? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Aftertax cost of debt Cost of preferred stock Cost of equity % 96 % If the firm 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 and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Weighted average cost of capital 9.50%
Lingenburger Cheese Corporation has 6.4 million shares of common stock outstanding. 320,000 shares of 4.65 percent preferred stock outstanding, par value of $100, and 73,000 5.6 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $74.25 per share and has a beta of 1.14, the preferred stock currently sells for $101.60 per share, and the bonds have 23 years to maturity and sell for 96.1 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 3.4 percent, and the firm's tax rate is 25 percent. 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. Market value weight of debt Market value weight of preferred stock Market value weight of equity What is the firm's cost of each form of financing? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Aftertax cost of debt Cost of preferred stock Cost of equity % 96 % If the firm 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 and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Weighted average cost of capital 9.50%
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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Transcribed Image Text:Lingenburger Cheese Corporation has 6.4 million shares of common stock outstanding. 320,000 shares of 4.65 percent preferred
stock outstanding, par value of $100, and 73,000 5.6 percent semiannual bonds outstanding, par value $2,000 each. The common
stock currently sells for $74.25 per share and has a beta of 1.14, the preferred stock currently sells for $101.60 per share, and the bonds
have 23 years to maturity and sell for 96.1 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 3.4 percent, and
the firm's tax rate is 25 percent.
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.
Market value weight of debt
Market value weight of preferred stock
Market value weight of equity
What is the firm's cost of each form of financing?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
Aftertax cost of debt
Cost of preferred stock
Cost of equity
%
96
%
If the firm 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 and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Weighted average cost of capital
9.50%
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