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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 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

 

$18,526,217

 

$18,329,129

 

$19,708,741

 

$23,059,227

 

$15,964,080

 

 
Abhinav 03-Dec-2019

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