Question
Bonaime, Inc., has 6.7 million shares of common stock outstanding. The current share price is $61.70, and the book value per share is $4.70. The
Bonaime, Inc., has 6.7 million shares of common stock outstanding. The current share price is $61.70, and the book value per share is $4.70. The company also has two bond issues outstanding. The first bond issue has a face value of $70.7 million, a coupon rate of 7.2 percent, and sells for 94.5 percent of par. The second issue has a face value of $35.7 million, a coupon rate of 7.2 percent, and sells for 93.5 percent of par. The first issue matures in 22 years, the second in 14 years. The most recent dividend was $3.20 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 companys cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the companys 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.) What is the companys equity weight? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) What is the companys weight of debt? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) What is the companys WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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