Dinklage Corp. has 8 million shares of common stock outstanding. The current share price is $87, 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 $75 million, a coupon rate of 10 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, a coupon rate of 11 percent, and sells for 105 percent of par. The first issue matures in 25 years, the second in 7 years. Suppose the most recent dividend was $5.90 and the dividend growth rate is 7 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 payments. The tax rate is 35 percent. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC % eBook & Resources eBook: 14.4. The Weighted Average Cost of Capital Check my work

Dinklage Corp. has 8 million shares of common stock outstanding. The current share price is $87, 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 $75 million, a coupon rate of 10 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, a coupon rate of 11 percent, and sells for 105 percent of par. The first issue matures in 25 years, the second in 7 years. Suppose the most recent dividend was $5.90 and the dividend growth rate is 7 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 payments. The tax rate is 35 percent. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC % eBook & Resources eBook: 14.4. The Weighted Average Cost of Capital Check my work

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Dinklage Corp. has 8 million shares of common stock outstanding. The current share price is $87, 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 $75 million, a coupon rate of 10 percent, and sells for 97 percent of par. The second issue has
a face value of $50 million, a coupon rate of 11 percent, and sells for 105 percent of par. The first issue
matures in 25 years, the second in 7 years.
Suppose the most recent dividend was $5.90 and the dividend growth rate is 7 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 payments. The tax rate is 35 percent. What is the company's WACC? (Do not round
intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
WACC
%
eBook & Resources
eBook: 14.4. The Weighted Average Cost of Capital
Check my work

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