6 Week Unit 5 Excel Assignment.xlsx

6 Week Unit 5 Excel Assignment.xlsx - Tip You may wish to...

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Tip: You may wish to print off this page for reference as you work through the problems. Tip: You are strongly encouraged to follow the Concept Connections in Chapter 13. Using the information below, answer all questions on Tabs A through E. Scroll down on each tab to be sure you are seeing all the questions. Taunton Construction Inc.'s capital situation is described as follows: Debt: The firm issued 10,000 20-year bonds 10 years ago at their par value of $1,000. The bonds carry a coupon rate of 12% and are now selling to yield 8%. The bonds pay interest semi-annually. Preferred Stock: 10,000 shares of preferred stock were sold three years ago at a par value of $100. The shares pay a dividend of $15 per year. Similar preferred issues are now yielding 10%. Equity: Initial financing was by selling 1 million shares of common stock at $25. Accumulated retained earnings are now $5,000,000. The stock is currently selling at $29 per share. Taunton's Target Capital Structure is as follows: Debt 30% Preferred Stock 5% Common Equity 65% 100% Additional information for Taunton is as follows: Marginal tax rate is 40% Flotation costs average 12% Short-term treasury bills currently yield 3.5% The market is returning 12.5% Taunton's beta is .6 The last annual dividend paid was $1.50 per share The firm is expected to grow at 4% indefinitely Taunton expects to earn $3 million next year The firm can borrow an additional $2M at rates similar to the market return on its old debt.
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