1. Crawford Enterprises is a publicly held company located in Arnold, Kansas. The firm began...
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Finance
1. Crawford Enterprises is a publicly held company located in Arnold, Kansas. The firm began as a small tool and die shop but grew over its 35-year life to become a leading supplier of metal fabrication equipment used in the farm tractor industry. At the close of 2020 the firms balance sheet appeared as follows: (3 Marks)
Cash
15,000
Accounts Receivable
75,000
Inventories
200,000
Long-term Liabilities
1,790,000
Net Property, Plant, Equipment
3,000,000
Common Equity
1,500,000
Total Assets
3,290,000
Total Debt and Equity
3,290,000
At present, the firms common stock is selling for a price equal to its book value, and the firms bonds are selling at par. Crawfords managers estimate that the market requires a 12 percent return on its common stock, the firms bonds command a yield to maturity of 7 percent, and the firm faces a tax rate of 30 percent. What is Crawfords weighted average cost of capital?
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