Johnny Cake Limited has 8 million shares of stock outstanding selling at $21 per share and an issue of $40 million in 9 percent annual coupon bonds with a maturity of 18 years, selling at 93.5 percent of par. Assume Johnny Cake's weighted-average tax rate is 21 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 17.89%
Johnny Cake Limited has 8 million shares of stock outstanding selling at $21 per share and an issue of $40 million in 9 percent annual coupon bonds with a maturity of 18 years, selling at 93.5 percent of par. Assume Johnny Cake's weighted-average tax rate is 21 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 17.89%
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:Johnny Cake Limited has 8 million shares of stock outstanding selling at $21
per share and an issue of $40 million in 9 percent annual coupon bonds with a
maturity of 18 years, selling at 93.5 percent of par. Assume Johnny Cake's
weighted-average tax rate is 21 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
17.89%
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