Question

The current stock price for a company is $31 per share, and there are 6 million...

The current stock price for a company is $31 per share, and there are 6 million shares outstanding. This firm also has 60,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 8%, 10 years to maturity, a face value of $1,000, and an annual yield to maturity of 8%, what is the total market value of this firm? (Answer to the nearest dollar, but do not use a dollar sign).

Homework Answers

Answer #1

Bonds:

Face Value = $1,000

Annual Coupon Rate = 8%
Semiannual Coupon Rate = 4%
Semiannual Coupon = 4% * $1,000
Semiannual Coupon = $40

Annual YTM = 8%
Semiannual YTM = 4%

Coupon Rate is equal to YTM. So, the current value of the bond is equal to the par value of the bond.

Current Price = $1,000
Number of bonds outstanding = 60,000

Value of Debt = Current Price * Number of bonds outstanding
Value of Debt = $1,000 * 60,000
Value of Debt = $60,000,000

Equity:

Number of shares outstanding = 6,000,000
Current price = $31

Value of Equity = Number of shares outstanding * Current price
Value of Equity = 6,000,000 * $31
Value of Equity = $186,000,000

Market Value of the Firm = Value of Debt + Value of Equity
Market Value of the Firm = $60,000,000 + $186,000,000
Market Value of the Firm = $246,000,000

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The current stock price for a company is $31 per share, and there are 6 million...
The current stock price for a company is $31 per share, and there are 6 million shares outstanding. This firm also has 260,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 7%, 26 years to maturity, a face value of $1,000, and an annual yield to maturity of 6.2%, what is the percent market value of debt for this firm? (Answer to the nearest hundredth of a percent, but do not use a...
The current stock price for a company is $33 per share, and there are 7 million...
The current stock price for a company is $33 per share, and there are 7 million shares outstanding. This firm also has 60,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 8%, 24 years to maturity, a face value of $1,000, and an annual yield to maturity of 6.8%, what is the percent market value of debt for this firm? (Answer to the nearest hundredth of a percent, but do not use a...
The current stock price for a company is $43 per share, and there are 3 million...
The current stock price for a company is $43 per share, and there are 3 million shares outstanding. This firm also has 80,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 6%, 10 years to maturity, a face value of $1,000, and an annual yield to maturity of 7.1%, what is the total market value of this firm? (Answer to the nearest dollar, but do not use a dollar sign).
The current stock price for a company is $40 per share, and there are 3 million...
The current stock price for a company is $40 per share, and there are 3 million shares outstanding. This firm also has 230,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 7%, 18 years to maturity, a face value of $1,000, and an annual yield to maturity of 6.2%, what is the total market value of this firm? (Answer to the nearest dollar, but do not use a dollar sign).
The current stock price for a company is $31 per share, and there are 7 million...
The current stock price for a company is $31 per share, and there are 7 million shares outstanding. The beta for this firms stock is 0.9, the risk-free rate is 4.7, and the expected market risk premium is 6.4%. This firm also has 60,000 bonds outstanding, which pay interest semiannually. These bonds have a coupon interest rate of 7%, 9 years to maturity, a face value of $1,000, and an annual yield to maturity of 6.5%. If the corporate tax...
The current stock price for a company is $31 per share, and there are 2 million...
The current stock price for a company is $31 per share, and there are 2 million shares outstanding. This firm also has 200,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 6%, 29 years to maturity, a face value of $1,000, and an annual yield to maturity of 7.2%, what is the percent market value of debt for this firm? (Answer to the nearest hundredth of a percent, but do not use a...
The current stock price for a company is $44 per share, and there are 7 million...
The current stock price for a company is $44 per share, and there are 7 million shares outstanding. The beta for this firms stock is 1.5, the risk-free rate is 4.2, and the expected market risk premium is 5.8%. This firm also has 200,000 bonds outstanding, which pay interest semiannually. These bonds have a coupon interest rate of 7%, 27 years to maturity, a face value of $1,000, and an annual yield to maturity of 8.8%. If the corporate tax...
38. The current stock price for a company is $41 per share, and there are 5...
38. The current stock price for a company is $41 per share, and there are 5 million shares outstanding. This firm also has 50,000 bonds outstanding, which pay interest semiannually. If these bonds have a coupon interest rate of 8%, 19 years to maturity, a face value of $1,000, and a current price of 976.95, what is the percent market value of equity for this firm? (Answer to the nearest hundredth of a percent, but do not use a percent...
The current stock price for a company is $40 per share, and there are 5 million...
The current stock price for a company is $40 per share, and there are 5 million shares outstanding. The beta for this firms stock is 1, the risk-free rate is 4.5, and the expected market risk premium is 6%. This firm also has 60,000 bonds outstanding, which pay interest semiannually. These bonds have a coupon interest rate of 6%, 20 years to maturity, a face value of $1,000, and a current price of 1,129.41. If the corporate tax rate is...
The current stock price for a company is $41 per share, and there are 8 million...
The current stock price for a company is $41 per share, and there are 8 million shares outstanding. The beta for this firms stock is 1.4, the risk-free rate is 4.4, and the expected market risk premium is 5.6%. This firm also has 170,000 bonds outstanding, which pay interest semiannually. These bonds have a coupon interest rate of 8%, 24 years to maturity, a face value of $1,000, and a current price of 1,059.68. If the corporate tax rate is...