Motto: I am proud to be a Cloverdale Cowboy, and the future of America. I have respect for myself, others, and property. There is no limit to what I can achieve. I promise to accept the challenges that will make me a leader of tomorrow. Welcome to Cloverdale Elementary School.
The present value of the face value (i.e. the maturity value) is calculated as follows: Therefore, the price of a bond is given by the following formula: Example 1: Bond with annual coupon payments. Company A has issued a bond having face value of $100,000 carrying annual coupon rate of 8% and maturing in 10 years. The market interest rate is 10%. The price of the bond is calculated as the present value of all future cash flows: Example 2: Bond with semiannual coupon payments. Company S has issued a bond having face value of $100,000 carrying coupon rate of 9% to be paid semiannually and maturing in 10 years.
Current Capital Structure consists three components: Long-term Debt (10 year A Bonds) with a book value of $ 400,000 and a cost of capital of 6.0%. Common Stock with a book value of $ 200,000 and a cost of capital of 18.0%. Retained Earnings with a book value of $ 50,000 and a cost of capital of 16.0%. Determine Market Values for Capital Components. 10-Year grade A bonds are selling for $ 1,150 per bond and the common stock is selling for $ 40.00 per share.ssume we have 500 bonds outstanding and 15,000 shares of stock outstanding. Market Value for Debt is $ 575,000 ($ 1,150 x 500) and Market Value for Stock is $ 600,000 ($ 40.00 x 15,000).  Allocate the Equity Market Value between Common Stock and Retained Earnings based on book values.