Calculate the firms market value capital structure. The total market value of a firm is given by capitalising the expected stream of operating earnings at a discount rate appropriate for its risk class. Hewlett packard 8 sony 3.5.
Current Market Value Of Preferred Stock = $103/Share.
The market always rewards a balanced capital structure, reflected in the share price. To estimate fair market value, valuators often use the subject company’s actual or optimal capital structure. Common stock outstanding = 5.4 million shares;
There Is Optimal Capital Structure Improvement On Market Value For Existing And Potential Shareholders.
V g = v u. St debt = 11.14% lt debt = 22.03% common equity = 66.83% Although there is a strong consensus that the weights in the cost of capital calculation must be market value weights, in a business valuation, appraisers do not use an unique approach to estimate the capital structure that will prevail in the future.
V G = Profit Before Interest/Wacc
But if the standard of value is investment value, it may be appropriate to use the buyer’s capital structure because the buyer’s financial attributes are considered in using this standard of value. The right level of capital structure minimizes the overall cost of capital to an optimum level. $$ w_p =\cfrac {\text{market value of preferred stock}}{\text{market value of debt}+\text{market value of equity}+\text{ market value of preferred stock}} $$ however, if the target capital structure is known and the company attempts to raise capital in a manner which is consistent with this target, then the target capital structure should be used.
The Common Stock Sells At A Price Of $60 Per Share.
Calculate the firms market value capital structure. The market value stems from trading in financial markets where investor estimated future cash flows from the company’s current and expected future project. I have the answers, i need to know how they get them.