This preview shows page 1. Sign up to view the full content.
Unformatted text preview: debt figure for calculating weights because in the absence of any other information, we assume the short-term debt will be rolled over from year to year. In this case, however, the company does not use short-term debt as a permanent source of financing. Indeed, as stated in the problem, the short-term debt balance is zero off-season. In such a situation neither the lender nor the company believes that the debt balance will be rolled over from year to year as the loan is closed out each off-season and so it is not considered a component of the capital structure. Preferred Stock : The preferred has a value of P ps = 4 / 11 . 2 $ = $72.73. There are $5,000,000/$100 = 50,000 shares of preferred outstanding, so the total market value of the preferred is 50,000($72.73) = $3,636,500. Answers and Solutions: 10 - 7...
View Full Document
This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08