ani Corporation has 5 million shares of common stock outstanding. The current share price is $65, and the ook value per share is $4. The company also has two bond issues outstanding. The first bond issue has a fa alue of $50 million, a coupon rate of 5 percent, and sells for 90 percent of par. The second issue has a face alue of $35 million, a coupon rate of 4 percent, and sells for 102 percent of par. The first issue matures in 20 ears, the second in 5 years. Suppose the most recent dividend was $4.05 and the dividend growth rate is 3. ercent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding ebt issues. The tax rate is 21 percent. What is the company's WACC?
ani Corporation has 5 million shares of common stock outstanding. The current share price is $65, and the ook value per share is $4. The company also has two bond issues outstanding. The first bond issue has a fa alue of $50 million, a coupon rate of 5 percent, and sells for 90 percent of par. The second issue has a face alue of $35 million, a coupon rate of 4 percent, and sells for 102 percent of par. The first issue matures in 20 ears, the second in 5 years. Suppose the most recent dividend was $4.05 and the dividend growth rate is 3. ercent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding ebt issues. The tax rate is 21 percent. What is the company's WACC?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Dani Corporation has 5 million shares of common stock outstanding. The current share price is $65, and the
book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face
value of $50 million, a coupon rate of 5 percent, and sells for 90 percent of par. The second issue has a face
value of $35 million, a coupon rate of 4 percent, and sells for 102 percent of par. The first issue matures in 20
years, the second in 5 years. Suppose the most recent dividend was $4.05 and the dividend growth rate is 3.9
percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding
debt issues. The tax rate is 21 percent. What is the company's WACC?
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