Question
Wilson Inc. uses bonds and common shares to finance its investments and operations. The firm's debt consists of 20,000 bonds that are currently trading at
Wilson Inc. uses bonds and common shares to finance its investments and operations. The firm's debt consists of 20,000 bonds that are currently trading at a price of $1038.75 each and yielding a 2.75% spread above federal government debt of the same maturity. Wilson's 500,000 common shares are currently trading at a price of $48.85 each. The firm just paid a dividend of $3.20 per share and it expects the dividend to grow by five percent per year for the foreseeable future. The risk-free rate of interest is currently 2.95% and the market risk premium is estimated to be 6.45%. The company's average tax rate is 38%.
- What is Wilson's D/E ratio?
- Calculate Wilson's 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