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Hero Manufacturing has 8 million shares of common stock outstanding. The current share price is $87 and the book value per share is $6. The company also has two bond issues outstanding, both with semiannual coupons. The first bond issue has a face value $75 million and a coupon of 10 percent and sells for 97 percent of par. The second issue has a face value of $50 million and a coupon of 11 percent and sells for 105 percent of par. The first issue matures in 25 years, the second in 7 years. |
| a. |
What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) |
| b. | What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) |
In: Finance
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Dinklage Corp. has 8 million shares of common stock outstanding. The current share price is $80, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $75 million, a coupon of 9 percent, and sells for 95 percent of par. The second issue has a face value of $45 million, a coupon of 10 percent, and sells for 108 percent of par. The first issue matures in 24 years, the second in 7 years. |
| a. |
What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) |
| Equity/Value | |
| Debt/Value |
| b. |
What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) |
| Equity/Value | |
| Debt/Value |
In: Finance
Dinklage Corp. has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $130 million, a coupon rate of 6 percent, and sells for 92 percent of par. The second issue has a face value of $115 million, a coupon rate of 5 percent, and sells for 103 percent of par. The first issue matures in 24 years, the second in 10 years.
Suppose the most recent dividend was $4.85 and the dividend growth rate is 5.2 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 22 percent. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
In: Finance
Hero Manufacturing has 6 million shares of common stock outstanding. The current share price is $72 and the book value per share is $7. The company also has two bond issues outstanding, both with semiannual coupons. The first bond issue has a face value $70 million and a coupon of 7 percent and sells for 97 percent of par. The second issue has a face value of $50 million and a coupon of 8 percent and sells for 106 percent of par. The first issue matures in 22 years, the second in 6 years.
a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.)
b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.)
In: Finance
Lyons Company manufactures and sells one product. The following information pertains to the company’s first year of operations:
| Variable cost per unit: | ||
| Direct materials | $ | 13 |
| Fixed costs per year: | ||
| Direct labor | $ | 750,000 |
| Fixed manufacturing overhead | $ | 420,000 |
| Fixed selling and administrative expenses | $ | 110,000 |
The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Lyons produced 60,000 units and sold 52,000 units. The selling price of the company’s product is $40 per unit.
2. Assume the company uses a variable costing system that assigns $12.50 of direct labor cost to each unit produced:
a. Compute the unit product cost for the year.
b. Prepare an income statement for the year.
3. Reconcile the difference between the super-variable costing and variable costing net operating incomes.
In: Accounting
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Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $68, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon rate of 6 percent, and sells for 97 percent of par. The second issue has a face value of $40 million, a coupon rate of 6.5 percent, and sells for 108 percent of par. The first issue matures in 21 years, the second in 6 years. Both bonds make semiannual payments. |
| a. |
What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .3216.) |
| b. | What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .3216.) |
In: Finance
Bonaime, Inc., has 7.9 million shares of common stock
outstanding. The current share price is $62.90, and the book value
per share is $5.90. The company also has two bond issues
outstanding. The first bond issue has a face value of $71.9
million, a coupon rate of 7.4 percent, and sells for 88.5 percent
of par. The second issue has a face value of $36.9 million, a
coupon rate of 8.4 percent, and sells for 87.5 percent of par. The
first issue matures in 18 years, the second in 10 years. The most
recent dividend was $3.80 and the dividend growth rate is 5
percent. Assume that the overall cost of debt is the weighted
average of that implied by the two outstanding debt issues. Both
bonds make semiannual payments. The tax rate is 40 percent.
What is the company’s WACC? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.)
In: Finance
Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $10. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million, a coupon rate of 4 percent, and sells for 96 percent of par. The second issue has a face value of $65 million, a coupon rate of 3 percent, and sells for 108 percent of par. The first issue matures in 20 years, the second in 9 years.
Suppose the most recent dividend was $4.35 and the dividend growth rate is 4.6 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 22 percent. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
In: Finance
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Dinklage Corp. has 8 million shares of common stock outstanding. The current share price is $74, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $95 million, a coupon rate of 7 percent, and sells for 97 percent of par. The second issue has a face value of $80 million, a coupon rate of 6 percent, and sells for 109 percent of par. The first issue matures in 23 years, the second in 6 years. Both bonds make semiannual coupon payments. |
| a. |
What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) |
| b. | What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) |
In: Finance
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Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $73, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $90 million, a coupon rate of 6 percent, and sells for 98 percent of par. The second issue has a face value of $75 million, a coupon rate of 5 percent, and sells for 110 percent of par. The first issue matures in 22 years, the second in 7 years. Both bonds make semiannual coupon payments. |
| a. |
What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) |
| b. | What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) |
In: Finance