Tis is the present yield to maturity on the bonds the

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Reference no: EM13483145

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 long-term 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: EM13483145

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