Hankins Corporation has 9.1 million shares of common stock outstanding, 660,000
ID: 2801946 • Letter: H
Question
Hankins Corporation has 9.1 million shares of common stock outstanding, 660,000 shares of 7.1 percent preferred stock outstanding, and 191,000 of 8.3 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $65.60 per share and has a beta of 1.36, the preferred stock currently sells for $106.40 per share, and the bonds have 16 years to maturity and sell for 88 percent of par. The market risk premium is 6.85 percent, T-bills are yielding 5.55 percent, and the firm’s tax rate is 30 percent. WACC = 12.57% a. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) Market value weight of debt: Market value weight of preferred stock: Market value weight of equity:
Explanation / Answer
market value of equity
9100000*65.6
596960000
Market value of debt
191000*1000*88%
168080000
market value of preferred stock
660000*106.4
70224000
total market value of firm
market value of equity+ market value of equity+ market value of preferred stock
596960000+168080000+70224000
source
market value
market value weight = value of source/total of market value
debt
168080000
20.12%
preferred stock
70224000
8.41%
equity
596960000
71.47%
total of market value of capital structure
835264000
100.00%
market value of equity
9100000*65.6
596960000
Market value of debt
191000*1000*88%
168080000
market value of preferred stock
660000*106.4
70224000
total market value of firm
market value of equity+ market value of equity+ market value of preferred stock
596960000+168080000+70224000
source
market value
market value weight = value of source/total of market value
debt
168080000
20.12%
preferred stock
70224000
8.41%
equity
596960000
71.47%
total of market value of capital structure
835264000
100.00%
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