What is the current market value of the firm debt

Reference no: EM131786917

Question: In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today, January 1, 2005, is as follows:

Long-term debt (bonds, at par)	$10,000,000
Preferred stock	2,000,000
Common stock ($10 par)	10,000,000
Retained earnings	4,000,000
Total debt and equity	$26,000,000

The bonds have a 4 percent coupon rate, payable semiannually, and a par value of $1,000. They mature on January 1, 2015. The yield to maturity is 12 percent, so the bonds now sell below par. What is the current market value of the firm's debt?

Reference no: EM131786917

Questions Cloud

Work in an atmosphere of distrust and fear : Employees work in an atmosphere of distrust and fear. Leaders make decisions behind closed doors. Changes to processes and staffing often

Compare the distributions of hours of work : Hours Worked In the 2012 General Social Survey, 636 male paid employees and 537 female paid employees were asked how many hours they worked in the last week.

How many units were started into production in department : The Slicing Department production process shows: Beginning Work in Process 10,000 Units. How many units were started into production in Department 1

Discuss the company uses the weighted-average method : The following is partial information for the month of March for Macmillan International Inc., a two-department manufacturer that uses process costing

What is the current market value of the firm debt : The bonds have a 4 percent coupon rate, payable semiannually, and a par value of $1,000. They mature on January 1, 2015.

Creating a vision as one of the defining characteristics : Kotter (2001) identified creating a vision as one of the defining characteristics of leadership. Academics and business leaders alike seem to echo the sentiment

What benefits of professionals forging personal relationship : What are the benefits of professionals forging personal relationships with young people? What are the risks or challenges? Do you think one outweighs the other?

Major decision for her uk based company : Fashionista Mode Tina Stead is pondering a major decision for her UK based company, Fashionista Mode. Twelve months ago

What must units started into production be : If beginning work in process is 4,000 units, ending work in process is 2,000 units, what must units started into production be

User Account

All Pages