Question
I was wondering if anyone could explain to me how to find Aftertax cost of equity, I got the other answers and I know I
I was wondering if anyone could explain to me how to find Aftertax cost of equity, I got the other answers and I know I need the aftertax cost of equity to find the WACC. I can't seem to figure it out.
Bonaime, Inc., has 7.6 million shares of common stock outstanding. The current share price is $62.60, and the book value per share is $5.60. The company also has two bond issues outstanding. The first bond issue has a face value of $71.6 million, a coupon rate of 7.1 percent, and sells for 90 percent of par. The second issue has a face value of $36.6 million, a coupon rate of 8.1 percent, and sells for 89 percent of par. The first issue matures in 21 years, the second in 13 years. The most recent dividend was $3.65 and the dividend growth rate is 7 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 34 percent.
What is the companys WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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