Calculate the firms market value capital structure

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Reference no: EM131376098

Suppose the Schoof Company has this book value balance sheet:

Current assets	$30,000,000	Current liabilities	$10,000,000
Fixed assets	50,000,000	Long-term debt	30,000,000
		Common equity
		Common stock(1 million shares)	1,000,000
		Retained earnings	39,000,000
Total assets	$80,000,000	Total claims	$80,000,000

The current liabilities consist entirely of notes payable to banks, and the interest rate on this debt is 10 percent, the same as the rate on new bank loans. The longterm debt consists of 30,000 bonds, each of which has a par value of $1,000, carries an annual coupon interest rate of 6 percent, and matures in 20 years.

The going rate of interest on new long-term debt, rd, is 10 percent, and this is the present yield to maturity on the bonds. The common stock sells at a price of $60 per share. Calculate the firm's market value capital structure.

Reference no: EM131376098

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