Question
In: Finance
Book value versus market value components. Compare Trout, Inc. with Salmon Enterprises, using the balance sheet...
Book value versus market value components. Compare Trout, Inc. with Salmon Enterprises, using the balance sheet of Trout and the market data of Salmon for the weights in the weighted average cost of capital: If the after-tax cost of debt is 10.6%, for both companies and the cost of equity is 14.64% which company has the higher WACC?
What is the book value adjusted WACC for Trout, Inc.?
____%
What is the market value adjusted WACC for Salmon Enterprises?
____%
Which company has the higher WACC?
A. Salmon Enterprises has a higher WACC at ___ than Trout, Inc. with a WACC of ___
B. Trout, Inc. has a higher WACC at ___ than Salmon Enterprises with a WACC of ___
|
Trout, Inc. |
||||
|
Current assets: |
$2,000,000 |
Current liabilities: |
$641,787 |
|
|
Long-term assets: |
$7,000,000 |
Long-term liabilities: |
$5,404,949 |
|
|
Total assets: |
$9,000,000 |
Owners' equity: |
$2,953,264 |
|
|
Salmon Enterprises |
||||
| Bonds outstanding: 3,000 selling at 928.39 | ||||
| Common stock outstanding: 260,000 selling at $30.53 | ||||
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Book value versus market value components. Compare Trout, Inc. with Salmon Enterprises, using the balance sheet...
Book value versus market value components.
Compare Trout, Inc. with Salmon Enterprises, using the balance
sheet of Trout and the market data of Salmon for the weights in the
weighted average cost of capital: If the after-tax cost of debt
is 7.3% for both companies and the cost of equity is 13.59%,
which company has the higher WACC? What is the book adjusted WACC
of both companies?
Trout, Inc. Current assets: $1,333,333 Current liabilities:
$780,712 Long-term assets: $4,666,667 Long-term liabilities:...
Book value versus market value components. The CFO of DMI is trying to determine the company's...
Book value versus market value components.
The CFO of DMI is trying to determine the company's WACC.
Brad, a promising MBA, says that the company should use book value
to assign the WACC components' percentages. Angela, a long-time
employee and experienced financial analyst, says that the company
should use market value to assign the components' percentages.
The after-tax cost of debt is at 7.6%, the cost of preferred
stock is at 12.46%, and the cost of equity is...
what is the difference between a book-value balance sheet and a market value balance sheet? Which...
what is the difference between a book-value balance sheet and a
market value balance sheet? Which provides better information to
investors and management.
Here are book- and market-value balance sheets of the United Frypan Company: Book-Value Balance Sheet Net...
Here are book- and market-value balance sheets of the United
Frypan Company:
Book-Value Balance Sheet
Net working capital
$
35
Debt
$
40
Long-term assets
65
Equity
60
$
100
$
100
Market-Value Balance Sheet
Net working capital
$
35
Debt
$
40
Long-term assets
190
Equity
185
$
225
$
225
Assume that MM’s theory holds except for taxes. There is no
growth, and the $40 of debt is expected to be permanent. Assume a
37% corporate tax rate....
Here are book and market-value balance sheets of the United Frypan Company: Book-Value Balance Sheet Net...
Here are book and market-value balance sheets of the United
Frypan Company:
Book-Value Balance Sheet
Net working capital
$
70
Debt
$
60
Long-term assets
30
Equity
40
$
100
$
100
Market-Value Balance Sheet
Net working capital
$
70
Debt
$
60
Long-term assets
150
Equity
160
$
220
$
220
Assume that MM’s theory holds except for taxes. There is no
growth, and the $60 of debt is expected to be permanent. Assume a
36% corporate tax rate....
For which of the following balance sheet items will the book value and market value most likely be closest at the time the balance sheet is prepared?
For which of the following balance sheet items will the book value and market value most likely be closest at the time the balance sheet is prepared? Select one: a. Long-term debt b. Common stock c. Net fixed assets d. Retained earnings e. Short-term debt
Here are book and market value balance sheets of the United Frypan Company. Book value balance...
Here are book and market value balance sheets of the United
Frypan Company.
Book value balance sheet
Net working capital 25 Debt 60
Long term assets 75 Equity 40
100 100
Market value balance sheet
Net working capital 25 debt
60
Long term assets 180 equity 145
205 205
Assume that MM's theory holds except for taxes. There is no
growth, and the $60 of debt is expected to...
The Balance sheet for a company shows a book value ofstockholders equity (book value per...
The Balance sheet for a company shows a book value of stockholders equity (book value per share x total shares outstanding) of $23,500,000. Furthermore, the firm's income statement for the year just ended has net income of $500,000, which is $0.25 per share of common stock outstanding. the P/E ratio for firm similar to this company is 20.Q1. What price would you expect this company share to sell forQ2. what is the book value per share for this company
Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet: Current assets...
Market Value Capital Structure Suppose the Schoof Company has
this book value balance sheet: Current assets $30,000,000 Current
liabilities $10,000,000 Notes payable 10,000,000 Fixed assets
50,000,000 Long-term debt 20,000,000 Common stock (1 million
shares) 1,000,000 Retained earnings 39,000,000 Total assets
$80,000,000 Total claims $80,000,000 The current liabilities
consist entirely of notes payable to banks, and the interest rate
on this debt is 7%, the same as the rate on new bank loans. These
bank loans are not used for seasonal...
Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet: Current assets...
Market Value Capital Structure
Suppose the Schoof Company has this book value balance
sheet:
Current assets
$30,000,000
Current liabilities
$20,000,000
Fixed assets
70,000,000
Notes payable
$10,000,000
Long-term debt
30,000,000
Common stock (1 million
shares)
1,000,000
Retained earnings
39,000,000
Total assets
$100,000,000
Total liabilities and equity
$100,000,000
The notes payable are to banks, and the interest rate on this
debt is 8%, the same as the rate on new bank loans. These bank
loans are not used for seasonal financing but...
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