Question

Information on Power Green, Inc., is shown below. Assume the company’s tax rate is 38%. Debt:...

Information on Power Green, Inc., is shown below. Assume the company’s tax rate is 38%.

Debt:

8,800 8.1% coupon bonds outstanding, $1,000 par value, selling for 103.5% of par, and YTM of 7.7%.

   

   

Common stock:

213,000 shares outstanding, selling for $83.30 per share; beta is 1.18.

   

   

Preferred stock:

12,300 shares of 5.9% preferred stock outstanding, currently selling for $97.70 per share.

   

   

Market:

7.15% market risk premium and 4.95% risk-free rate.


1. What is the market value of Equity (Common Stock)?

2. What is the market value of Preferred Stock?

3. What is the market value of Debt?

4. What is the market value of the firm?

(express your answers as numbers with commas, with two decimal points. Do not show the $ sign. e.g. 1,234.56)

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Homework Answers

Answer #1

1.Market Value of Equity = Number of Shares * Selling Price

= 213,000 shares outstanding * $83.30 per share

= $ 17,742,900.00

Answer = 17,742,900.00

2. Market Value of Preferred Stock = Number of Shares * Selling Price

= 12,300 shares * $97.70 per share

= $ 1201710.00

Answer = 1,201,710.00

3. Market Value of Debt = Number of Bonds * Selling Price

=8800*(1000*103.50%)

= $ 9,108,000.00

Answer = 9,108,000.00

4. market Value of firm = Market Value of Equity + Preferred Stock + Debt

= $ 17,742,900.00+ $ 1201710.00+ $ 9,108,000.00

= $ 28,052,610.00

Answer = 28,052,610.00

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