In August 2015 the capital structure of the Emerson Electric Corporation (EMR) (measured in book and market values) was as follows:
($ Millions)
Book Value($)
Market Value($)
Short-term debt
2,504
2,504
Long-term debt
4,382
4,382
Common equity
8,113
35,703
Total Capital
14,999
42,589
What weights should Emerson use when computing the firm's weighted average cost of capital?
a. The appropriate weight of debt is _____ %. (Round to one decimal place.)
b. The appropriate weight of common equity, is________%. (Round to one decimal place.)
In August 2015 the capital structure of the Emerson Electric Corporation (EMR) (measured in book and market values) was as follows:
| ($ Millions) | Book Value($) | Market Value($) |
| Short-term debt | 2,504 | 2,504 |
| Long-term debt | 4,382 | 4,382 |
| Common equity | 8,113 | 35,703 |
| Total Capital | 14,999 | 42,589 |
What weights should Emerson use when computing the firm's weighted average cost of capital?
a. The appropriate weight of debt is _____ %. (Round to one decimal place.)
b. The appropriate weight of common equity, is________%. (Round to one decimal place.)
Related questions
In March of 2016 the capital structure of IT solutions (measured in market values) appears as follows:
| Thousands of dollars | Book Value | Market Value |
| Accounts Payable | 50,000 | 50,000 |
| Common Equity | 500,000 | 750,000 |
| Long-Term Debt | 600,000 | 600,000 |
| Total assets | 1,150,000 | 1,400,000 |
Calculate the appropriate weights of debt and equity in the capital structure of the company?
Companyâs common stock currently sells $12.00 per share. The firm pays dividends annually and expects dividends to grow at a constant rate of 3% indefinitely. The most recent annual dividend per share, paid yesterday, is $1.00. Calculate the cost of common equity?
Market Value Capital Structure
Suppose the Schoof Company has this book value balance sheet:
| Current assets | $30,000,000 | Current liabilities | $20,000,000 | |||
| Fixed assets | 70,000,000 | Notes payable | $10,000,000 | |||
| Long-term debt | 30,000,000 | |||||
| Common stock (1 million shares) | 1,000,000 | |||||
| Retained earnings | 39,000,000 | |||||
| Total assets | $100,000,000 | Total liabilities and equity | $100,000,000 |
The notes payable are to banks, and the interest rate on this debt is 7%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company's permanent capital structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 8%, and a 15-year maturity. The going rate of interest on new long-term debt, rd, is 11%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $70 per share. Calculate the firm's market value capital structure. Do not round intermediate calculations. Round your answers to two decimal places.
| Short-term debt | $ | % | ||
| Long-term debt | ||||
| Common equity | ||||
| Total capital | $ | % |
Market Value Capital Structure
Suppose the Schoof Company has this book value balance sheet:
| Current assets | $30,000,000 | Current liabilities | $20,000,000 | |||
| Fixed assets | 70,000,000 | Notes payable | $10,000,000 | |||
| Long-term debt | 30,000,000 | |||||
| Common stock (1 million shares) | 1,000,000 | |||||
| Retained earnings | 39,000,000 | |||||
| Total assets | $100,000,000 | Total liabilities and equity | $100,000,000 |
The notes payable are to banks, and the interest rate on this debt is 9%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company's permanent capital structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 6%, and a 20-year maturity. The going rate of interest on new long-term debt, rd, is 11%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $68 per share. Calculate the firm's market value capital structure. Do not round intermediate calculations. Round your answers to two decimal places.
Short-term Debt $_____________ _______________%
Long-term Debt $_____________ _______________%
Common Equity $_____________ _______________%
Total Capital $_____________ _______________%
