Question: Market Value Capital Structure Suppose the Schoof Company has this book value balance sheet:
| Current assets |
$30,000,000 |
Current liabilities |
$20,000,000 |
| Fixed assets |
70,000,000 |
Notes payable |
$10,000,000 |
|
|
Long-term debt |
30,000,000 |
|
|
Common stock (1 million shares) |
1,000,000 |
|
|
Retained earnings |
39,000,000 |
| Total assets |
$100,000,000 |
Total liabilities and equity |
$100,000,000 |
The notes payable are to banks, and the interest rate on this debt is 7%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company's permanent capital structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 8%, and a 25-year maturity. The going rate of interest on new long-term debt, rd, is 10%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $56 per share. Calculate the firm's market value capital structure. Do not round intermediate calculations. Round your answers to two decimal places.