Reference is made to the 2022 Balance Sheet of Tram-Ropes limited. Tram-Ropes Limited Balance Sheet 2022 Cash 1,000,000.00 Accounts Payable 8,000,000.00 Acc. Receivable 12,000,000.00 Notes Payable 8,500,000.00 Marketable securities 3,000,000.00 Long-term Debt 20,000,000.00 Inventories 7,500,000.00 Common stock 7,500,000.00 Fixed Assets 26,500,000.00 Preferred Stock 6,000,000.00 Total Assets 50,000,000.00 Total Liabilities and Equity 50,000,000.00 Additional Information: The Long-Term debt consists of 8% annual coupon bonds, with 15 years to maturity and are currently selling for 95% of par. The company’s common shares which have a book value of $20 per share are currently selling at $25 per share. Preferred shares have a book value of $100 per share. These shares are currently selling at $120 per share and pays dividends of 6% per annum on book value. iv. The dividend growth rate is expected to be 3%, and dividend for 2023 is projected to be $5.00 per share. The Company’s Tax rate is 30%. Required: Determine the following for Tram-Ropes Limited: Total Market value of the firm’s capital structure After-tax Cost of Debt
Reference is made to the 2022 Balance Sheet of Tram-Ropes limited. Tram-Ropes Limited Balance Sheet 2022 Cash 1,000,000.00 Accounts Payable 8,000,000.00 Acc. Receivable 12,000,000.00 Notes Payable 8,500,000.00 Marketable securities 3,000,000.00 Long-term Debt 20,000,000.00 Inventories 7,500,000.00 Common stock 7,500,000.00 Fixed Assets 26,500,000.00 Preferred Stock 6,000,000.00 Total Assets 50,000,000.00 Total Liabilities and Equity 50,000,000.00 Additional Information: The Long-Term debt consists of 8% annual coupon bonds, with 15 years to maturity and are currently selling for 95% of par. The company’s common shares which have a book value of $20 per share are currently selling at $25 per share. Preferred shares have a book value of $100 per share. These shares are currently selling at $120 per share and pays dividends of 6% per annum on book value. iv. The dividend growth rate is expected to be 3%, and dividend for 2023 is projected to be $5.00 per share. The Company’s Tax rate is 30%. Required: Determine the following for Tram-Ropes Limited: Total Market value of the firm’s capital structure After-tax Cost of Debt
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Reference is made to the 2022 Balance Sheet of Tram-Ropes limited.
|
|
Tram-Ropes Limited Balance Sheet 2022 |
|
|
|
Cash |
1,000,000.00 |
Accounts Payable |
8,000,000.00 |
|
Acc. Receivable |
12,000,000.00 |
Notes Payable |
8,500,000.00 |
|
Marketable securities |
3,000,000.00 |
Long-term Debt |
20,000,000.00 |
|
Inventories |
7,500,000.00 |
Common stock |
7,500,000.00 |
|
Fixed Assets |
26,500,000.00 |
Preferred Stock |
6,000,000.00 |
|
Total Assets |
50,000,000.00 |
Total Liabilities and Equity |
50,000,000.00 |
Additional Information:
- The Long-Term debt consists of 8% annual coupon bonds, with 15 years to maturity and are currently selling for 95% of par.
- The company’s common shares which have a book value of $20 per share are currently selling at $25 per share.
Preferred shares have a book value of $100 per share. These shares are currently selling at $120 per share and pays dividends of 6% per annum on book value. iv. Thedividend growth rate is expected to be 3%, and dividend for 2023 is projected to be $5.00 per share.- The Company’s Tax rate is 30%.
Required:
Determine the following for Tram-Ropes Limited:
- Total Market value of the firm’s capital structure
- After-tax Cost of Debt
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