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Dani Corp. has 5.5 million shares of common stock outstanding. The current share price is $83 and the book value per share is $5. The
Dani Corp. has 5.5 million shares of common stock outstanding. The current share price is $83 and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million, a coupon rate of 5.5% and sells for 109% of par. The second issue has a face value of $45 million, a coupon rate of 5.8% and sells for 108% of par. The first issue matures in 21 years, the second in 6 years. Both bonds make semi annual coupon payments. A. What are the companys capital structure weights on a book value basis? B. What are the companys capital structure weights on a market value basis? C. Which are more relevant, the book or the market value weights? Why? In the previous problem, suppose the most recent dividend was $3.85 and the dividend growth rate is 5%. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. The tax rate is 21%. What is the companys WACC
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