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Help please! Johnny Cake Ltd. has 12 million shares of stock outstanding selling at $21 per share and an issue of $60 million in 8
Help please!
Johnny Cake Ltd. has 12 million shares of stock outstanding selling at $21 per share and an issue of $60 million in 8 percent annual coupon bonds with a maturity of 17 years, selling at 94.5 percent of par. Assume Johnny Cake's weighted-average tax rate is 21 percent, its next dividend is expected to be $3 per share, and all future dividends are expected to grow at 4 percent per year, indefinitely. What is its WACC? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Calculate the project-specific benchmarks for each project. (Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.7, 1.3, 1.4, and 1.6, respectively. Assume all current and future projects will be financed with 25 percent debt and 75 percent equity, the current cost of equity (based on an average firm beta of 1.1 and a current risk-free rate of 3 percent) is 13 percent and the after-tax yield on the company's bonds is 8 percent. What will the WACCs be for each division? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)Step by Step Solution
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