In order to accurately assess the capital structure of a firm,it is necessary to convert i
In order to accurately assess the capital structure of a firm,it is necessary to convert its balance sheet figures fromhistorical book values to market values. KJM Corporation's balancesheet (book values) as of today is as follows: The bonds have a8.3% coupon rate, payable semiannually, and a par value of $1,000.They mature exactly 10 years from today. The yield to maturity is11%, so the bonds now sell below par. What is the current marketvalue of the firm's debt?
Long-term debt (bonds, at par) $23,500,000
Preferred stock 2,000,000
Common stock ($10 par) 10,000,000
Retained earnings 4,000,000
Total debt and equity $39,500,000