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Suppose the Schoof Company has this book value balance sheet: Current assets Fixed assets Short-term debt Long-term debt Common equity Total capital $ $30,000,000 $ 70,000,000 Total assets The notes payable are to banks, and the interest rate on this debt is 7%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company's permanent capital: The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 8%, and a 15-year maturity. The going rate of interest on new long-term debt, rd, is 10%, and this is the presen maturity on the bonds. The common stock sells at a price of $60 per share. Calculate the firm's market value capital structure. Do not round intermediate calculations. Round the monetary values to the nearest dollar and perce values to two decimal places. Current liabilities Notes payable $100,000,000 Long-term debt Common stock (1 million shares) Retained earnings Total liabilities and equity % $20,000,000 10,000,000 30,000,000 1,000,000 39,000,000 $100,000,000 %

Suppose the Schoof Company has this book value balance sheet: Current assets Fixed assets Short-term debt Long-term debt Common equity Total capital $ $30,000,000 $ 70,000,000 Total assets The notes payable are to banks, and the interest rate on this debt is 7%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company's permanent capital: The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 8%, and a 15-year maturity. The going rate of interest on new long-term debt, rd, is 10%, and this is the presen maturity on the bonds. The common stock sells at a price of $60 per share. Calculate the firm's market value capital structure. Do not round intermediate calculations. Round the monetary values to the nearest dollar and perce values to two decimal places. Current liabilities Notes payable $100,000,000 Long-term debt Common stock (1 million shares) Retained earnings Total liabilities and equity % $20,000,000 10,000,000 30,000,000 1,000,000 39,000,000 $100,000,000 %

Essentials Of Investments
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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### Schoof Company Balance Sheet Analysis **Balance Sheet (Book Value):** - **Assets** - Current Assets: $30,000,000 - Fixed Assets: $70,000,000 - **Liabilities and Equity** - Current Liabilities: $20,000,000 - Notes Payable: $10,000,000 - Long-term Debt: $30,000,000 - Common Stock (1 million shares): $1,000,000 - Retained Earnings: $39,000,000 - **Total Assets:** $100,000,000 - **Total Liabilities and Equity:** $100,000,000 **Notes:** - The notes payable to banks have an interest rate of 7%. These loans are part of the company's permanent capital structure. - Long-term debt comprises 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 8%, and a 15-year maturity. - The going rate of interest on new long-term debt, \(r_d\), is 10%, representing the present yield to maturity. - Common stock sells at $60 per share. **Task:** Calculate Schoof Company’s market value capital structure. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. **Inputs for Calculation:** - **Short-term debt** - Amount: ___________ - Percentage: ___________ % - **Long-term debt** - Amount: ___________ - Percentage: ___________ % - **Common equity** - Amount: ___________ - Percentage: ___________ % - **Total capital** - Amount: ___________ - Percentage: ___________ % ### Steps to Calculate Market Value Capital Structure 1. **Market Value of Debt:** - Calculate the market value of both short-term and long-term debt using their interest rates and terms. 2. **Market Value of Equity:** - Determine the market value of equity by multiplying the number of shares by the current stock price. 3. **Total Capital:** - Sum the market values of debt and equity to find the total capital. 4. **Percentage of Each Component:** - Divide each component's market value by the total capital to determine the percentage. This breakdown helps analyze the capital structure, offering insights into financial stability and investment potential
Transcribed Image Text:### Schoof Company Balance Sheet Analysis **Balance Sheet (Book Value):** - **Assets** - Current Assets: $30,000,000 - Fixed Assets: $70,000,000 - **Liabilities and Equity** - Current Liabilities: $20,000,000 - Notes Payable: $10,000,000 - Long-term Debt: $30,000,000 - Common Stock (1 million shares): $1,000,000 - Retained Earnings: $39,000,000 - **Total Assets:** $100,000,000 - **Total Liabilities and Equity:** $100,000,000 **Notes:** - The notes payable to banks have an interest rate of 7%. These loans are part of the company's permanent capital structure. - Long-term debt comprises 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 8%, and a 15-year maturity. - The going rate of interest on new long-term debt, \(r_d\), is 10%, representing the present yield to maturity. - Common stock sells at $60 per share. **Task:** Calculate Schoof Company’s market value capital structure. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. **Inputs for Calculation:** - **Short-term debt** - Amount: ___________ - Percentage: ___________ % - **Long-term debt** - Amount: ___________ - Percentage: ___________ % - **Common equity** - Amount: ___________ - Percentage: ___________ % - **Total capital** - Amount: ___________ - Percentage: ___________ % ### Steps to Calculate Market Value Capital Structure 1. **Market Value of Debt:** - Calculate the market value of both short-term and long-term debt using their interest rates and terms. 2. **Market Value of Equity:** - Determine the market value of equity by multiplying the number of shares by the current stock price. 3. **Total Capital:** - Sum the market values of debt and equity to find the total capital. 4. **Percentage of Each Component:** - Divide each component's market value by the total capital to determine the percentage. This breakdown helps analyze the capital structure, offering insights into financial stability and investment potential
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