Shareholders equity common shares contributed surplus...

Shareholders' Equity Common Shares Contributed Surplus-Reacquisition of Common Shares Retained Earnings Accumulated Other Comprehensive Income Total Balance, January 1 $600,000 $32,500 $179,500 $51,000 $863,000 Issued shares for cash - - - - - Reacquired common shares (25,000) (28,750) - - (53,750) Profit (loss) for the year - - 22,500 - 22,500 Common dividends-Cash - - (21,000) - (21,000) Other comprehensive income (loss) for the year - - - 17,000 17,000 Balance, December 31 $575,000 $3,750 $181,000 $68,000 $827,750

Transcript

00:01 Hello students, here is a question.

00:02 The crane product company as currently has a debt with a market value of $275 million.

00:09 Outstanding.

00:10 The debts consist of 9 % of coupon bond which have a maturity of 15 years and currently priced at $1 ,418 .61 per bond.

00:19 The firm also have an issue 2 million preferred shares outstanding with a market price of $11 per share.

00:25 The preferred share pay an annual dividend of $1 .20.

00:30 Crane also have 14 million shares of a common stock outstanding with a price of $20 per share.

00:35 The firm is expected to pay $2 .20 a common dividend of 1 year for today and then the dividend is expected to increase by 5 % for the year forever.

00:45 If crane is subject to 40 % marginal tax rate then what is the firm's weighted average cost of capital? so, this is our question.

00:54 Let us discuss the answer for this.

00:56 Calculate the weighted of debts common equity and the preferred stock.

01:02 So, that is a question and we will discuss the answer now.

01:05 First, we need to calculate the total market value of a firm.

01:08 Capital structure, the sum of market value of a debt share of a preferred common.

01:13 So, that is total market value is market value of debt, market value of debts plus market value of preferred equity, market value of preferred equity plus market value of common equity plus market value of common equity and the values are 275 million dollars plus 2 million into 11 dollars plus 14 million into 20...

Question

Please give Ace some feedback