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Five years ago Hemingway Inc. issued 6,000 30-year bonds with par values of $1,000 at a...

Five years ago Hemingway Inc. issued 6,000 30-year bonds with par values of $1,000 at a coupon rate of 10%. The bonds are now selling to yield 5%. The company also has 15,000 shares of preferred stock outstanding that pay a dividend of $6.50 per share. These are currently selling to yield 10%. Its common stock is selling at $21, and 200,000 shares are outstanding. Assume that the coupon payments are semi-annual. Calculate Hemingway's market value based capital structure. Round the values to the nearest dollar and the weights to two decimal places. Round PVF and PVFA values in intermediate calculations to four decimal places. Do not round other intermediate calculations.

Component Value Capital Structure
Debt $   %
Preferred stock %
Equity %
Total Capital $   %
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Answer #1

Current Price of Bond = Coupon * PVAF(0.025,50) + Maturity * PVF(0.025,50)

Current Price of Bond = 50 * 28.3623 + 1000 * 0.2909

Current Price of Bond = $1709.0150

Price of Preferred Stock = Dividend / Yield

Price of Preferred Stock = 6.50 / 10%

Price of Preferred Stock = $65

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