Question
Bolster Foods (BF) balance sheet shows a total of $25 million long-term debt with a coupon rate of 7.5%. The yeild to maturity on this
Bolster Foods (BF) balance sheet shows a total of $25 million long-term debt with a coupon rate of 7.5%. The yeild to maturity on this debt is 7.00% and the debt has a total current market value of $25,875,000. The balance sheet also shows that the company has 7.5 million shares of stock, and the stock has a total book values per share of $7.00. The current stock price is $18.00 per share, and stockholders' required rate of return is 12.25%. The company recently decided that its target capital structure should have 35% debt, with the balance being common equity. The tax rate is 40%. Calculate WACCs based on book, market, and target capital structures.
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