Johnny Cake Limited has 12 million shares of stock outstanding selling at $17 per share and an issue of $60 million in 9 percentannual coupon bonds with a maturity of 18 years, selling at 91.5 percent of par. Assume Johnny Cake's weighted-average tax rate is21 percent, it cannot make use of interest tax shields for the foreseeable future, its next dividend is expected to be $3 per share,and all future dividends are expected to grow at 6 percent per year, indefinitely.What is its WACC?Note: Do not round intermediate calculations. Round your final answer to 2 decimal places.WACC%

WACC=0.1636 or 16.36%Johnny Cake Limited's Weighted Average Cost of Capital (WACC) is approximately…

Answered: Johnny Cake Limited has 12 million…

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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SlowGrowth Corporation currently pays a dividend of $2.3 per year. Stock analysts expect the company would continue to pay the current dividend amount for three years and, after the three years, increase dividend by 2% per year in perpetuity. According to the stock analysts forecast of future dividends, what should be the stock price today if the discount rate is 4%?
Abercrombie & Fitch's common stock pays a dividend of $0.75. It is currently selling for $35.91. If the firm's investors require a return of 15 percent on their investment from buying Abercrombie & Fitch stock, what growth rate would Abercrombie & Fitch have to provide the investors?
Assume Gillette Corporation will pay an annual dividend of $0.63 one year from now. Analysts expect this dividend to grow at 12.6% per year thereafter until the 6th year. Thereafter, growth will level off at 1.6% per year. According to the dividend-discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 7.7%? The value of Gillette's stock is $ (Round to the nearest cent.)
Marie Corp. has $1,465 in debt outstanding and $2,804 in common stock (and no preferred stock). Its marginal tax rate is 30%. Marie's bonds have a YTM of 6.7%. The current stock price (Po) is $46. Next year's dividend is expected to be $2.81, and it is expected to grow at a constant rate of 7% per year forever. The company's W.A.C.C. is ____%. Round your final answer to 2 decimal places (example: enter 12.34 for 12.34%), but do not round any intermediate work in the process.
ABC Inc. is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50% and the tax rate is 40%. The target capital structure consist of debt and 55% common equity. What is the companys WACC if all the equity used is from retained earnings?
man.1
New Gadgets, Incorporated, currently pays no dividend but is expected to pay its first annual dividend of $4.90 per share exactly 7 years from today. After that, the dividends are expected to grow at 3.5 percent forever. If the required return is 11.3 percent, what is the price of the stock today?
SlowGrowth Corporation currently pays a dividend of $2.3 per year. Stock analysts expect the company would continue to pay the current dividend amount for three years and, after the three years, increase dividend by 2% per year in perpetuity. According to the stock analysts forecast of future dividends, what should be the stock price today if the discount rate is 4%?
Time Warner shares have a market capitalization of $55 billion. The company just paid a dividend of $0.35 per share and each share trades for $35. The growth rate in dividends is expected to be 6.5% per year. Also, Time Warner has $20 billion of debt that trades with a yield to maturity of 7%. If the firm's tax rate is 30%, compute the WACC?
None
Scampini Technologies is expected to generate $100 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 11%. If Scampini has 50 million shares of stock outstanding, what is the stock's value per share? Do not round intermediate calculations. Round your answer to the nearest cent. Each share of common stock is worth $ , according to the corporate valuation model.
Johnny Cake Ltd. has 10 million shares of stock outstanding selling at $23 per share and an issue of $50 million in 9 percent, annual coupon bonds with a maturity of 17 years, selling at 93.5 percent of par. If Johnny Cake’s weighted average tax rate is 34 percent, its next dividend is expected to be $3.00 per share, and all future dividends are expected to grow at 6 percent per year, indefinitely, what is its WACC? 1.Solve for rate on Bond 2.Solve for cost of the stock 3.Solve for WACC. Please show proper steps with explanation.

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