The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as...

The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is as follows


Cash and marketable securities	€	2,700	Short-term debt	€	76,800
Accounts receivable		121,200	Accounts payable		63,200
Inventory		126,200	Current liabilities	€	140,000
Current assets	€	250,100
Property, plant, and equipment		213,200	Long-term debt		209,800
Deferred taxes		46,200
Other assets		87,800	Shareholders' equity		247,500
Total	€	597,300	Total	€	597,300

The debt has an interest rate of 6.50% (short term) and 8.50% (long term). The expected rate of return on the company's shares is 15.50%. There are 7.58 million shares outstanding, and the shares are trading at €44. The tax rate is 25%. Assume the company issues €50 million in new equity and uses the proceeds to retire long-term debt. Also assume the company's borrowing rates are unchanged and the short-term debt is permanent. Use the three-step procedure.

a. Calculate the cost of equity after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. Calculate the WACC after the capital restructuring. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Expert Solution

ekkarill92 answered 2 years ago

Texas Instrument Corp. has the following simplified balance sheet:

Texas Instrument Corp. has the following simplified balance sheet:Cash $ 50,000 Current liabilities $125,000Inventory 150,000Accounts receivable 100,000 Long-term debt 175,000Net fixed assets 200,000 Common equity 200,000Total $500,000 Total $500,000Net Sales for the year totaled $600,000 and its gross profit is $100,000. The company president believes the company carries excess inventory. She would like the inventory turnover ratio to be 8 times and would use the cash that we free up from reducing the inventory to meet the targeted inventory turnover...

Thomas Corp. has the following simplified balance sheet: Cash &

Thomas Corp. has the following simplified balance sheet: Cash $ 50,000 Current liabilities $125,000 Inventory 150,000 Accounts receivable 100,000 Long-term debt 175,000 Net fixed assets 200,000 Common equity 200,000 Total $500,000 Total $500,000 Cost of sales for the year totaled $600,000 and its gross profit is $200,000. The company president believes the company carries excess inventory. She would like the inventory turnover ratio to be 6 times and would use the cash that we free up from reducing the inventory...

Use the following balance sheet information to answer this question. Balance Sheet (dollars in thousands) and...

Use the following balance sheet information to answer this question. Balance Sheet (dollars in thousands) and Duration (in years) Duration Amount T-bills 0.5 90 T-notes 0.9 55 T-bonds 4.393 176 Loans 7 2,724 Deposits 1 2,092 Federal funds 0.01 238 Equity 715 A )What is the average duration of all the assets? B )What is the average duration of all the liabilities? C )What is the FI’s leverage-adjusted duration gap? What is the FI’s interest rate risk exposure? D...

Stealcase’s Balance Sheet, as of December 31(thousands of dollars)

Stealcase’s Balance Sheet, as of December 31(thousands of dollars) 2017 2018 2017 2018 Cash 30 25 Account Payable 35 50 Accts Receivable 5 20 Bank Loan 25 25 Inventory 100 100 Accrued Taxes 15 25 Current Assets 135 245 Long Term, Dept current portion 12 12 Current Liabilities 87 112 Net Plant & Equip 200 250 Long-Term Dept 100 95 Common Stock (10,000 shares) 100 100 Additional paid-in...

The following items are a simplified version of very recent balance sheet data relating to the...

The following items are a simplified version of very recent balance sheet data relating to the Federal Reserve Bank of the United States of America: Currency at issue $1,650bn Accounts due to foreign central banks and others $83bn Loans to private banks $130bn Government securities $3,850bn Government balance $407bn Exchange settlement account balances $1,867bn Net foreign currency reserves (and gold) $37bn Other assets $30bn Classify each of the above individually as either an asset or a liability of the Federal...

The following is a simplified Balance Sheet for a Canadian bank: _______________________________________________________________________________________________ Great White North Bank...

The following is a simplified Balance Sheet for a Canadian bank: _______________________________________________________________________________________________ Great White North Bank Balance Sheet As at Dec. 31, 2017 Assets Liabilities Cash Reserves $ 20,000 Demand Deposits $100,000 Loans to Customers 50,000 Investment in Securities 30,000 Equity Fixed Assets 20,000 Shareholders’ Equity 20,000 Total Assets $120,000 Total Liabilities & Equity $120,000 _______________________________________________________________________________________________ What percent of its demand deposits is this bank holding in cash reserves (the reserve ratio)?...

Below is the simplified balance sheet of Gorgonzolan commercial banks at some point in time. Assets...

Below is the simplified balance sheet of Gorgonzolan commercial banks at some point in time. Assets Currency (= reserves) 400,000 Loans 200,000 Liabilities Deposits 600,000 Assume that the Gorgonzolan commercial banks desire to hold reserves of 40 percent of deposits and that the public holds no currency long term. Instructions: Enter your responses as whole numbers. a. Given the data in the balance sheet, the Gorgonzolan commercial banks want to hold in reserves. b. The Gorgonzolan commercial banks currently have...

A(n) __ is a simplified balance sheet. asset account T - account bank account _ has...

A(n) ______ is a simplified balance sheet. asset account T - account bank account _____ has the key advantage that it is readily understood by the public and is highly transparent. The reserve rule Inflation targeting Prime rate targeting Discount rate targeting The interest rate the Fed charges other banks for loans is the ______ rate and the interest rate on over night loans from one bank to another bank is the ______ rate. federal funds; discount reverse repo; repo...

Suppose the simplified consolidated balance sheet shown below is for the entire commercial banking system and...

Suppose the simplified consolidated balance sheet shown below is for the entire commercial banking system and that all figures are in billions of dollars. The reserve ratio is 10 percent. Instructions: All answers to this question should be entered as whole numbers. Assets Liabilities and net worth 1 (a) (b) 1' (a) (b) Reserves $52 $ $ Checkable deposits $200 $ $ Securities 48 $ $ Loans 100 $ $ a. What is the amount of excess reserves...

Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is...

Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is 10 percent. Instructions: Enter your answers as whole numbers. a. What is the maximum amount of new loans that Big Bucks Bank can make? $ . Show in columns 1 and 1' how the bank's balance sheet will appear after the bank has lent this additional amount. Assets Liabilities and net worth (1) (2) (1' ) (2' ) Reserves $23,000 $ $ Checkable...

Question