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Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $76, and the book value per share is $5. The
Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $76, 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 $90 million, a yield to maturity of 5.50 percent, and sells for 94 percent of par. The second issue has a face value of $70 million, a yield to maturity of 4.56 percent, and sells for 104 percent of par. The first issue matures in 20 years, the second in 3 years. Suppose the most recent annual dividend was $4.80 and the annual dividend growth rate is 8 percent. The tax rate is 35 percent Calculate the company's WACC. Start by calculating the firm's market value. (Enter your answer as a dollar amount, not millions of dollars, Le.enter one million as 1,000,000) Firm's Market Value (debt & equity) $ Now calculate the firm's cost of equity and after-tax cost of debt. (Enter your answers as percent rounded to two decimals. Assume the YTMs are quoted as an EAR, not an APR.) Cost of Equity After-tax Cost of Debt % Now calculate the WACC. (Don't round your intermediate steps and enter your answer as a percent rounded to two decimals.) WACC %
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