Mr. Berti the finance manager of Giannini Corporation (GC) has complied the following information to estimate the company's WACC. The GC's noncallable bonds mature in 7 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $942.96. The bond pays coupon payment semi- annually. GC's stock sells for $20 per share, its last dividend was $1.00, and its growth rate is a constant 6 percent. The target capital structure consists of 35% debt and the balance is common equity. GC does not expect to issue any new shares. The GC's tax rate is 40%. What is GC's WACC?

Mr. Berti the finance manager of Giannini Corporation (GC) has complied the following information to estimate the company's WACC. The GC's noncallable bonds mature in 7 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $942.96. The bond pays coupon payment semi- annually. GC's stock sells for $20 per share, its last dividend was $1.00, and its growth rate is a constant 6 percent. The target capital structure consists of 35% debt and the balance is common equity. GC does not expect to issue any new shares. The GC's tax rate is 40%. What is GC'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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Gadget Co invests in a $100,000 bond with an 8% coupon rate. The market rate of interest is 10% annually and it is a 5 year bond 1. Assuming the company invests on January 1st and only pays $92,418 for this bond, what is the journal entry on January 1st? 2. Prepare a full amortization table for this bond: Purchase Year 1 Year 2 Year 3 Year 4 Year 5 Cash Received Interest Revenue Amortized Value Carrying Value stess Questions 3 and 4 on the next tab +
BankMart Inc. recently issued bonds that mature in 11 years. They have a par value of $1,000 and an annual coupon of 5%. The current market interest rate is 7%. What is the bond's value?
Loran Chalices Inc. hired you as a consultant to estimate the company's WACC. You have obtained the following information. (1) The company's noncallable bonds mature in 20 years, have a coupon rate of 7.00% paid annually, a par value of $1,000, and a current market price of $875. (2) The company's tax rate is 25%. (3) The required rate of return on the company's common stock based on CAPM is 10.3%. (4) The target capital structure consists of 45% debt, with the remainder comprised of common equity. What is its WACC?
Charter Corp. has issued 1,554 debentures with a total principal value of $1,554,000. The bonds have a coupon interest rate of 9%. a. What dollar amount of interest per bond can an investor expect to receive each year from Charter? b. What is Charter's total interest expense per year associated with this bond issue? c. Assuming that Charter is in a 39% corporate tax bracket, what is the company's net after-tax interest cost associated with this bond issue?
Assets, Incorporated, plans to issue $6 million of bonds with a coupon rate of 7.8 percent, a par value of $1,000, semiannual coupons, and 25 years to maturity. The current market interest rate on these bonds is 7.1 percent. In one year, the interest rate on the bonds will be either 9 percent or 5 percent with equal probability. Assume investors are risk-neutral. a. If the bonds are noncallable, what is the price of the bonds today?
Company Z hired you as a consultant to estimate the company's WACC. You have obtained the following information. (1) The company's noncallable bonds mature in 20 years, have a coupon rate of 5.00% paid annually, a par value of $1,000, and a current market price of $850. (2) The company's tax rate is 25%. (3) The required rate of return on the company's common stock based on CAPM is 10.0%. (4) The target capital structure consists of 30% debt, with the remainder comprised of common equity. What is its WACC? Group of answer choices 7.48% 7.58% 8.43% 8.90% 6.33%
The New Dance LLC. has 10,000 perpetual bonds outstanding, a par value of $1000. Also, The bonds have a coupon rate of 5% paid annually. The nomial interest rate on these bonds is 8%. This LLC. also has 2 million shares of stock outstanding with a market price of $30/share. What is this LLC.'s market value debt equity ratio?
Charlie Corporation is a chemical company. The company issued an outstanding bond with a P100,000 par value at 15-year maturity date. The coupon rate is 8%, and interest is paid quarterly. The required nominal interest rate on this borrowings has now increased to 16 percent . What is the current market value of the bond? Rules in solving: a. For the "PV FACTOR in computing the PV of the coupon and PV for the maturity value/ principal use until 8-9th decimal place" before multiplying the coupon payment or future value.Example: ___x 2.123456789 or 22.12345678b. For "COMPOUNDED RATES" include all decimals in the rate (do not round off).Example semi-annual: 13%/2 =0.065c. For the "VALUE OF THE BOND/ PRICE OF THE BOND" round off your answers and final answers into whole numbers.Example: 824.59= 825
BankMart Inc. recently issued bonds that mature in 11 years. They have a par value of $1,000 and an annual coupon of 6%. The current market interest rate is 8%. What is the bond's value?
The Textile Co. has an annual bond outstanding that matures in 8 years and carries a 7 percent coupon. The bond has a market value of $1,030.44. The company has a corporate tax rate of 35 percent. What is the aftertax cost of debt? 2.28 percent 4.23 percent 5.76 percent 6.50 percent
The bonds issued by United Corp. bear a coupon of 5 percent, payable semiannually. The bond matures in 17 years and has a $1,000 face value. Currently, the bond sells at $952. The yield to maturity (YTM) is ________%.

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