In 2013 Caterpillar Inc. had about 646 million shares outstanding. Their book value was $39 per share, and the market price was $82.50 per share. The company’s balance sheet shows that the company had $26.0 billion of long-term debt, which was currently selling near par value
Olympic Sports has two issues of debt outstanding. One is a 9% coupon bond with a face value of $38 million, a maturity of 15 years, and a yield to maturity of 10%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 10%. The face value of the issue is $43 million, and the issue sells for 93% of par value. The firm's tax rate is 20%
Pangbourne Whitchurch has preferred stock outstanding. The stock pays a dividend of $9 per share, and sells for $60. What is the percentage cost of the preferred stock?
Reliable Electric is a regulated public utility, and it is expected to provide steady dividend growth of 5% per year for the indefinite future. Its last dividend was $5 per share; the stock sold for $50 per share just after the dividend was paid. What is the company’s cost of equity?
Reactive Industries has the following capital structure. Its corporate tax rate is 30%.
Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 37% of the company’s present value, and you believe that at this capital structure the company’s debtholders will demand a return of 7% and stockholders will require 14%. The company is forecasting that next year’s operating cash flow (depreciation plus profit after tax at 40%) will be $75 million and that investment expenditures will be $37 million. Thereafter, operating cash flows and investment expenditures are forecast to grow in perpetuity by 4% a year