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    Capital Structure of the firm based on market values

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    Examine he book value balance sheet of University Products Inc. What is the capital structure of the firm based on market values? The preferred stock currently sells for $ 15 per share and the common stock for $ 20 per share. There are one million common shares outstanding.

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    © BrainMass Inc. brainmass.com June 3, 2020, 6:02 pm ad1c9bdddf
    https://brainmass.com/business/capital-structure-and-firm-value/capital-structure-firm-based-market-values-45296

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    Step 1) Calculate the current mkt price of bonds and then find the mkt value of all the bonds

    To calculate the price of the bond we need to calculate / read from tables the values of
    PVIF= Present Value Interest Factor
    PVIFA= Present Value Interest Factor for an Annuity
    Price of bond= PVIF * Redemption value + PVIFA * interest payment per period

    PVIFA( n, r%)= =[1-1/(1+r%)^n]/r%
    PVIF( n, r%)= =1/(1+r%)^n

    Price ...

    Solution Summary

    The solution calculates the market value weights of common stock, preferred stock, bonds.

    $2.19

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