Western Electric has 35,000 ordinary shares outstanding at a price per share of $47 and a rate of return of 13.5%. The firm has 5,000 preference shares paying 7% dividend outstanding at a price of $58 a share. The preferred share has a par value of $100. The outstanding bond has a total face value of $450,000 and currently sells for 1029% of face. The pre-tax yield-to-maturity on the bond is 8.49%. Required: a) Calculate the total market value of the firm. b) Calculate the capital structure of the firm places) c) Calculate the firm's weighted average cost of capital if the tax rate is 30%, assuming a classical tax (Please round up the result at 3 decimal system.
Western Electric has 35,000 ordinary shares outstanding at a price per share of $47 and a rate of return of 13.5%. The firm has 5,000 preference shares paying 7% dividend outstanding at a price of $58 a share. The preferred share has a par value of $100. The outstanding bond has a total face value of $450,000 and currently sells for 1029% of face. The pre-tax yield-to-maturity on the bond is 8.49%. Required: a) Calculate the total market value of the firm. b) Calculate the capital structure of the firm places) c) Calculate the firm's weighted average cost of capital if the tax rate is 30%, assuming a classical tax (Please round up the result at 3 decimal system.
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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Step 1
A combination of the long-term debts and different types of stocks to raise funds for the business operation is term as the capital structure.
Step 2
Computation of the total market value, capital structure, and weighted average cost of capital of the firm:
It is computed in the following manner:
Step by step
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