The Christian Company has the following book value balance sheet: The long-term
ID: 2721545 • Letter: T
Question
The Christian Company has the following book value balance sheet: The long-term debt consists of 40,000 bonds outstanding with a par value of dollar 1.000 each. The annual coupon rate on the bonds is 6 percentage, paid semiannually, and the bonds have 20 years to maturity. The current rate of interest (yield to maturity) on new, 26-year debt, If is 10 percentage. The common stock sells at a price of dollar 60 per share. Calculate value capital structure (percent of debt financing and equity financing in the market value capital structure.) Market Value Capital Structure to: (fill In >>*?Explanation / Answer
Calculation of Market Value Capital Structure:
Market value Long-Term Debt :
Face Value $1,000
Coupon rate 6%
Time to maturity 20 years
Current Market rate 10%
Bonds Outstanding 40,000
Bond’s Price =$656.82(Using Financial Calculator)
Debt Market Value = 26,272,800
Market value Common Equity:
Current Stock Price 60 per share
Shares Outstanding 1,000,000
Equity Market value 60,000,000
Total market value Capital Structure = 26,272,800 + 60,000,000 = 86,272,800