Question
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 YTM of 10.45%, a face value of $80 million, has a 10 percent coupon, and sells for 96 percent of par. The second issue has a YTM of 10.26%, a face value of $50 million, has a 11 percent coupon, and sells for 104 percent of par. The first issue matures in 25 years, the second in 8 years. The most recent dividend was $5.3 and the dividend growth rate is 5 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. Whar is the company's WACC? Show all your work, including intermediary steps.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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