UMUC Solution 4.4 and 5.5 HW Session 4

UMUC Solution 4.4 and 5.5 HW Session 4 - PROBLEM 4-4 Given...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
PROBLEM 4-4 Given December 31, 2006 Liabilities and Owner's Capital Current liabilities Accounts payable $8,250,000 Notes payable - - Other current liabilities` 7,266,000 Total current liabilities $15,516,000 $- $420,000,000 $434,091,171 Total liabilities $435,516,000 $434,091,171 Owners' capital $40,000,000 Paid-in-capital 100,025,000 Accumulated earnings 255,000,000 Total owners' capital $395,025,000 $900,000,000 Total liabilities and owners' capital $830,541,000 $1,334,091,171 Capital Market Data Treasury Bond Yield 5.42% Market Risk Premium 5.00% Unlevered equity beta (SIC 4924) 0.90 Stock price $22.50 Market capitalization $900,000,000 Yield on debt 8.00% Bond beta 0.30 Short-term interest bearing debt $- New long-term debt total $- Tax Rate 40.00% Solution Step 1: Evaluate the capital structure weights $1,320,000,000 Debt / Enterprise Value 32.89% Equity / Enterprise Value 67.11% Step 2: Estimate the costs of Financing Debt (after taxes) 4.80% Equity 10.76% Levered equity beta 1.07
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/12/2012 for the course FINANCE 630 taught by Professor Smith during the Spring '12 term at University of Maryland Baltimore.

Page1 / 2

UMUC Solution 4.4 and 5.5 HW Session 4 - PROBLEM 4-4 Given...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online