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5 years ago hemingway inc. issued 6000 30 years bonds with par values of 1000 at...

5 years ago hemingway inc. issued 6000 30 years bonds with par values of 1000 at a coupon rate of 8%. the bonds are now selling to yield 5%. the company also has 15 shares of prefer stockoutstanding that pay a dividend of 6.50 per shere. these are currently selling to yield 10% its common stock its selling at 21, and 200000 shares are outstanding. Calculate Hemingway's market value based capital structure.

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Answer #1

N = 25, FV = 1000, rate = 5%, PMT = 80

use PV function in Excel

price of one bond = 1422.8183

price of preferred shares = 6.5/0.1 = 65

capital structure:

Amount weight
equity               4,200,000.00 0.3297
debt               8,536,909.80 0.6702
preferred shares                           975.00 0.0001
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