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Please help with these WACC calculations, thanks! A B E F G H 1 2 3 Exhibit 1 Worldwide Paper Company Cost-of-Capital Information 4 5
Please help with these WACC calculations, thanks!
A B E F G H 1 2 3 Exhibit 1 Worldwide Paper Company Cost-of-Capital Information 4 5 6 Interest Rates: January 15, 2016 7 8 Bank loan rates (LIBOR) 1-year 1.15% Market risk premium Historical average 9 6.0% 10 11 12 13 Government bonds 1-year 0.49% 5-year 1.46% 10-year 2.04% 30-year 2.82% Corporate bonds (10-year maturities): Aaa 2.45% 3.38% A 3.85% 5.05% 14 15 Baa 16 17 18 19 Worldwide Paper Financial Data 20 21 22 23 Balance-sheet accounts (in millions of dollars) Bank loan payable (LIBOR + 1%) 500 Long-term debt 2,500 Common equity 500 Retained earnings 2,000 24 25 26 27 28 29 30 Per-share data Shares outstanding (millions) Book value per share Recent market value per share 500 $5.00 $24.00 31 32 33 Other data Bond rating Beta A 1.10 34 35 36 Source: Datastream D A B 1 Weighted Average Cost of Capital Calculation: 2 3 Percent Debt 4 Cost of Debt 5 Tax Rate 6 Percent Equity 7 Cost of Equity 8 9 WACC 10 11 12 13 14 15 A B E F G H 1 2 3 Exhibit 1 Worldwide Paper Company Cost-of-Capital Information 4 5 6 Interest Rates: January 15, 2016 7 8 Bank loan rates (LIBOR) 1-year 1.15% Market risk premium Historical average 9 6.0% 10 11 12 13 Government bonds 1-year 0.49% 5-year 1.46% 10-year 2.04% 30-year 2.82% Corporate bonds (10-year maturities): Aaa 2.45% 3.38% A 3.85% 5.05% 14 15 Baa 16 17 18 19 Worldwide Paper Financial Data 20 21 22 23 Balance-sheet accounts (in millions of dollars) Bank loan payable (LIBOR + 1%) 500 Long-term debt 2,500 Common equity 500 Retained earnings 2,000 24 25 26 27 28 29 30 Per-share data Shares outstanding (millions) Book value per share Recent market value per share 500 $5.00 $24.00 31 32 33 Other data Bond rating Beta A 1.10 34 35 36 Source: Datastream D A B 1 Weighted Average Cost of Capital Calculation: 2 3 Percent Debt 4 Cost of Debt 5 Tax Rate 6 Percent Equity 7 Cost of Equity 8 9 WACC 10 11 12 13 14 15Step by Step Solution
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