Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond ISsues outstanding. The first bond Issue has a face value of $65 million, has a 6 percent Coupon, and sells for 96 percent of par. The second Issue has a face value of $45 million, has a 7 percent coupon, and sells for 105 percent of par The first Issue matures in 21 years, the second in 5 years. The most recent dividend was $4.3 and the dividend growth rate is 5 percent. Assume that the overall cost of debt is the welghted average of that Impled by the two outstanding debt Issues. Both bonds make semlannual payments. The tax rate is 35 percent. What is the company's WACC?
Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond ISsues outstanding. The first bond Issue has a face value of $65 million, has a 6 percent Coupon, and sells for 96 percent of par. The second Issue has a face value of $45 million, has a 7 percent coupon, and sells for 105 percent of par The first Issue matures in 21 years, the second in 5 years. The most recent dividend was $4.3 and the dividend growth rate is 5 percent. Assume that the overall cost of debt is the welghted average of that Impled by the two outstanding debt Issues. Both bonds make semlannual payments. The tax rate is 35 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
Problem 1PS
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Transcribed Image Text:Dinklage Corp. has 5 million shares of common stock outstanding. The current share
price is $71. and the book value per share is $6. The company also has two bond Issues
outstanding The first bond Issue has a face value of $65 million, has a 6 percent
Coupon, and sells for 96 percent of par The second issue has a face value of $45
million, has a 7 percent coupon, and sells for 105 percent of par. The first Issue matures
in 21 years, the second in 5 years.
The most recent dividend was $4.3 and the dividend growth rate is 5 percent. Assume
that the overall cost of debt Is the welghted average of that implled by the two
outstanding debt issues. Both bonds make semlannual payments The tax rate is 35
percent
What is the company's WACC?
Mutple Choce
962%
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