Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company has 6.2 million shares of common stock outstanding. The current share price is $61.20, and the book value per share is $4.20. The

image text in transcribed

A company has 6.2 million shares of common stock outstanding. The current share price is $61.20, and the book value per share is $4.20. The company also has two bond issues outstanding. The first bond issue has a face value of $70.2 million, a coupon rate of 7.2 percent, and sells for 97 percent of par. The second issue has a face value of $35.2 million, a coupon rate of 6.7 percent, and sells for 96 percent of par. The first issue matures in 22 years, the second in 14 years. The most recent dividend was $2.95 and the dividend growth rate is 8 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 30 percent. What is the company's cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity % What is the company's aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt % What is the company's equity weight? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Equity weight What is the company's weight of debt? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Debt weight What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions