Question
Given the information below, compute the after-tax WACC for Tiny Corp. Tiny Corp long term debentures were issued last week at par value of
Given the information below, compute the after-tax WACC for Tiny Corp.
▪ Tiny Corp long term debentures were issued last week at par value of $30 million with a yield of 8% (annual coupons)
▪ Tiny Corp has 50,000,000 shares outstanding. Each share is expected to pay a dividend of $0.50 in perpetuity at 4%
▪ The beta (b) of Tiny Corp shares is 0.75 ▪ The expected return on the market portfolio is 15%
▪ The risk-free rate is 5%
▪ The tax rate is 30%
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
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