Dinklage Corp. has 10 million shares of common stock outstanding. The current share price is $82, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $85 million, has a 5 percent coupon, and sells for 97 percent of par. The second issue has a face value of $55 million, has a 6 percent coupon, and sells for 105 percent of par. The first issue matures in 20 years, the second in 9 years. The most recent dividend was $5.4 and the dividend growth rate is 6 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 payents. The tax rate is 38 percent. What is the company's WACC? Multiple Choice
Dinklage Corp. has 10 million shares of common stock outstanding. The current share price is $82, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $85 million, has a 5 percent coupon, and sells for 97 percent of par. The second issue has a face value of $55 million, has a 6 percent coupon, and sells for 105 percent of par. The first issue matures in 20 years, the second in 9 years. The most recent dividend was $5.4 and the dividend growth rate is 6 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 payents. The tax rate is 38 percent. What is the company's WACC? Multiple Choice
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
Problem 1PS
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Transcribed Image Text:Multiple Choice
11.56%
5.24%
5.29%
10.53%
5.27%
A
Transcribed Image Text:Dinklage Corp. has 10 million shares of common stock outstanding. The current share
price is $82, and the book value per share is $5. The company also has two bond issues
outstanding. The first bond issue has a face value of $85 million, has a 5 percent
coupon, and sells for 97 percent of par. The second issue has a face value of $55
million, has a 6 percent coupon, and sells for 105 percent of par. The first issue matures
in 20 years, the second in 9 years.
The most recent dividend was $5.4 and the dividend growth rate is 6 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 payents. The tax rate is 38
percent.
What is the company's WACC?
Multiple Choice
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