Question
Sapp Truckings balance sheet shows a total of noncallable long-term debt (par value of $1,000) with an annual coupon rate of 7.00% (semiannual payment) and
Sapp Truckings balance sheet shows a total of noncallable long-term debt (par value of $1,000) with an annual coupon rate of 7.00% (semiannual payment) and a price of $975 with a maturity of 15 years left. There is no preferred stocks. There are 100,000 corporate bonds. The balance sheet also shows that the company has 5 million shares of common stocks. The current stock price is $22.50 per share; its beta is 1.2 and a risk free rate of 3% and market risk premium is 6%. The firms tax rate is 34%.
Calculate WACC based on market value as the weights and WACC based on book value weights *USING EXCEL*
| payment mode (per year) = | 2 |
| stock price = | 22.5 |
| beta = | 1.2 |
| risk free rate = | 3% |
| market risk premium = | 6% |
| tax rate= | 25% |
| # of shares = | 5,000,000 |
| Market-value based | ||||
| weight | cost | |||
| bonds | ||||
| equity | ||||
| WACC= |
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International Finance Theory And Policy
Authors: Paul Krugman, Maurice Obstfeld, Marc Melitz
12th Global Edition
1292417005, 978-1292417004
