Valuations With No Fuss by Olusegun Oyekanmi

Author:Olusegun Oyekanmi
Language: eng
Format: epub
Tags: Finance, Valuations, Corporate Finance, Business Studies, Guide, Analysis, Valuation Fundamentals
Publisher: NosaDigital
Published: 2018-05-13T16:00:00+00:00

Amount (000s)

Long-term debt

$7,500

Preferred shares (stock)

$2,000

Common shares (stock)

$6,000

Retained earnings

$8,000

Total

$23,500

TABLE 26: LONG-TERM debt variables and amounts

In Nosakhare’s case, it was decided that retained earnings would not be used in the capital structure of the firm. The weight column indicates the percentage of the different variables in the overall capital structure. This is calculated as:

For long-term debt, the weight is:

Cost is simply the cost of the different sources of long-term debt calculated earlier, i.e. cost of debt, cost of equity, etc. The weighted cost is simply the multiple of the weight and cost:

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