Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dinklage Corp. has 5 milition shares of common stock outstanding. The current share price is $77, and the book value per share is $8. The

image text in transcribed
Dinklage Corp. has 5 milition shares of common stock outstanding. The current share price is $77, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $60 million, a yeld to maturity of 6.26 percent, and sells for 97 percent of par. The second issue has a face value of $30 million, a yleid to maturity of 5.59 percent, and sells for 105 percent of par. The first issue matures in 21 years, the second in 4 years. Suppose the most recent annual dividend was $4.90 and the annual dividend growth rate is 6 percent. The tax rate is 40 percent. Calculate the company's WACC. Start by calculating the firm's market value. (Enter your answer as a doliar amount, not millions of dollars, le enter one milition 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.) 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_2

Step: 3

blur-text-image_3

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

Principles Of Financial Modelling Model Design And Best Practices Using Excel And VBA

Authors: Michael Rees

1st Edition

111890401X, 978-1118904015

More Books

Students also viewed these Finance questions

Question

Excel caculation on cascade mental health clinic

Answered: 1 week ago

Question

What are some sources of ethical guidance?

Answered: 1 week ago