Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Dinklage Corp. has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $8. The
Dinklage Corp. has 9 million shares of common stock outstanding. The current share price is $81, 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 $80 million, a yield to maturity of 10.45 percent, and sells for 96 percent of par. The second issue has a face value of $50 million, a yield to maturity of 10.26 percent, and sells for 104 percent of par. The first issue matures in 25 years, the second in 8 years. Suppose the most recent annual dividend was $5.30 and the annual dividend growth rate is 5 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, i.e. 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
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started