Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $85, and the book value per share is $8. The

image text in transcribed
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $85, 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 $65 million, a yield to maturity of 8.50 percent, and sells for 95 percent of par. The second issue has a face value of $40 million, a yield to maturity of 7.07 percent, and sells for 108 percent of par. The first issue matures in 23 years, the second in 5 years. Suppose the most recent annual dividend was $5.70 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 vour answer as a dollar amount, not millions of dollars, Le. enter one million as 1,000,000 ) 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 \% 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

Million Air Exclusive Strategies For Pilots To Build Significant Wealth

Authors: Andy Garrison

1st Edition

1541383095, 978-1541383098

More Books

Students also viewed these Finance questions