Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dinklage Corp has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $5. The

image text in transcribed
Dinklage Corp has 4 million shares of common stock outstanding. The current share price is $70, 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 $60 million, a yield to maturity of 5.41 percent, and sells for 95 percent of par. The second issue has a face value of $40 million, a yield to maturity of 4.89 percent, and sells for 104 percent of par. The first issue matures in 20 years, the second in 4 years. Suppose the most recent annual dividend was $4.20 and the annual dividend growth rate is 4 percent. The tax rate is 38 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, i. 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 vour answers as nercent rounded to two decimals. Assume the YTMs are quoted as an EAR, not an APR.) Now calculate the WACC. (Don't round your intermediate steps and enter your answer as a percent rounded to two decimals) 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

Design Of Cost Management Systems

Authors: Robin Cooper, Robert S. Kaplan

2nd Edition

0135704170, 978-0135704172

More Books

Students also viewed these Accounting questions