Question

Hankins Corporation has 6.1 million shares of common stock outstanding, 314,000 shares of 4.5 percent preferred stock outstanding, par value of $100, and 67,000 5.5 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $73.80 per share and has a beta of 1.17, the preferred stock currently sells for $105.40 per share, and the bonds have 20 years to maturity and sell for 95.5 percent of par. The market risk premium is 6.5 percent, T-bills are yielding 3.1 percent, and the firm’s tax rate is 22 percent.

What is the firm's market value capital structure?

Answer 1

The firm's market value capital structure is $611,245,600.00

Step-by-step explanation:

Hankins Corporation firm's market value of capital structure is the sum of the market worth of common stock,preferred stock and the debt financing.

The market value of equity is the number of common stock issued and outstanding multiplied by market price per share

The market value of the preferred stock is the number of preferred stock issued multiplied by the market value per unit of preferred stock,same applies to debt(bonds issued)

Market value of equity=6,100,000*$73.80=$ 450,180,000.00

Market of preferred stock=314,000*$105.40=$33,095,600.00

Market value of bonds=67,000*$2000*95.5%=$ 127,970,000.00

Total market value $611,245,600.00