9,000 = 2,200 + 4,500 + Preferred stock
9,000 - 6,700 = 2,300
(I think it's safe to assume that total liabilities = debt.)
Here's the info I'm given:
TK estimates that it can issue debt at a before-tax cost of 12%, and its tax rate is 36%. The company can also issue preferred stock at $45 per share, which pays a constant dividend of $3.50 annually. Floatation costs on the preferred are $1.50 per share.
Net income is estimated to be $3,200, and the firm plans to maintain its policy of paying out 30% as dividends. The company’s stock currently sells for $37 per share. The next dividend is expected to be $2.55, which is $.17 higher than the most recent dividend. Furthermore, these dividends are expected to continue to grow at the same rate. Float costs on newly issued common stock are $2.50 per share. The company’s balance sheet is as follows:
PP&E: $4,500
Cash: $1,500
Inventory: $,3000
Total Assets: $9,000
Debt: $2,200
Preferred Stock: ?
Common Equity: $4,500
Total Liabilities: ?
I'm trying to calculate the WACC, and for this I need the weights of debt, preferred stock, and common equity. But first I need to figure out what the preferred stock is on this balance sheet. Any help will be appreciated!
