Homework Answers
d) Cost of new common stock, ka = D / (P - F) + g = 3 / (60 - 3) + 6% = 11.26%
e)
| Weight | Cost | |
| Equity | 40% | 11.26% |
| Preferred | 20% | 8.33% |
| Debt | 40% | 6.00% |
| WACC | 7.85% |
f) Capital Budget = Retained earnings / Weight of equity = 80 / 40% = $200 million
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8%, $20 par preferred and $5 par common. At December 31, 2020, the
following accounts were included in stockholders’ equity.
Preferred Stock, 159,600 shares
$ 3,192,000
Common Stock, 1,970,000 shares
9,850,000
Paid-in Capital in Excess of Par—Preferred Stock
193,000
Paid-in Capital in Excess of Par—Common Stock
27,534,000
Retained Earnings
4,424,000
The following transactions affected stockholders’ equity during
2021.
Jan. 1
29,100 shares of preferred stock issued at $22 per share.
Feb....
Sarasota Company has two classes of capital stock outstanding:
8%, $20 par preferred and $5 par common. At December 31, 2020, the
following accounts were included in stockholders’ equity.
Preferred Stock, 148,200 shares
$ 2,964,000
Common Stock, 1,991,000 shares
9,955,000
Paid-in Capital in Excess of Par—Preferred Stock
207,000
Paid-in Capital in Excess of Par—Common Stock
26,478,000
Retained Earnings
4,495,000
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2021.
Jan. 1
29,200 shares of preferred stock issued at $23 per share.
Feb....
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