Identify the firms market value capital structure

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Reference no: EM132018848

Suppose the Schoof Company has this book value balance sheet:

Current assets	$30,000,000	Current liabilities	$20,000,000
Fixed assets	70,000,000	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

The notes payable are to banks, and the interest rate on this debt is 11%, 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 structure.

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 25-year maturity.

The going rate of interest on new long-term debt, rd, is 11%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $50 per share.

Calculate the firm's market value capital structure. Do not round intermediate calculations. Round your answers to two decimal places.

Reference no: EM132018848

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