Reference is made to the 2022 Balance Sheet of Tram-Ropes limited. Tram- Ropes Limited Cash 1,000,000 Accounts Payable 8,000,000 Accounts Receivable 12,000,000 Notes Payable 8,500,000 Marketable securities 3,000,000 Long-tern Debt 20,000,000 Inventories 7,500,000 Common Stock 7,500,000 Fixed Assets 26,500,000 Preferred Stock 6,000,000 Total Assets 50,000,000 Total Liabilities and Equity 50,000,000 Additional Information: The Long-Term debt consists of 8% annual coupon bonds, with 15 years to maturity and are currently selling for 95% of par. The company’s common shares which have a book value of $20 per share are currently selling at $25 per share. 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. The dividend growth rate is expected to be 3%, and dividend for 2023 is projected to be $5.00 per share. The Company’s Tax rate is 30%. Determine the following for Tram-Ropes Limited: Total Market value of the firm’s capital structure After-tax Cost of Debt Cost of Common Stock Cost of Preferred Stock WACC
Reference is made to the 2022 Balance Sheet of Tram-Ropes limited.
|
Tram- Ropes Limited |
|||
|
Cash |
1,000,000 |
Accounts Payable |
8,000,000 |
|
Accounts Receivable |
12,000,000 |
Notes Payable |
8,500,000 |
|
Marketable securities |
3,000,000 |
Long-tern Debt |
20,000,000 |
|
Inventories |
7,500,000 |
Common Stock |
7,500,000 |
|
Fixed Assets |
26,500,000 |
Preferred Stock |
6,000,000 |
|
Total Assets |
50,000,000 |
Total Liabilities and Equity |
50,000,000 |
Additional Information:
The Long-Term debt consists of 8% annual coupon bonds, with 15 years to maturity and are currently selling for 95% of par.
The company’s common shares which have a book value of $20 per share are currently selling at $25 per share.
The
The Company’s Tax rate is 30%.
Determine the following for Tram-Ropes Limited:
Total Market value of the firm’s capital structure
After-tax Cost of Debt
Cost of Common Stock
Cost of Preferred Stock
WACC
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