OооOO10.45%9.53%8.6%18.13%9.07% Filer Manufacturing has 8 million shares of common stock outstanding. The current shareprice is $74, and the book value per share is $5. Filer Manufacturing also has two bondissues outstanding. The first bond issue has a face value of $80 million, has a 9 percentcoupon, and sells for 95 percent of par. The second issue has a face value of $60million, has a 10 percent coupon, and sells for 108 percent of par. The first issue maturesin 24 years, the second in 8 years.The most recent dividend was $4.6 and the dividend growth rate is 5 percent. Assumethat the overall cost of debt is the weighted average of that implied by the twooutstanding debt issues. Both bonds make semiannual payments. The tax rate is 35percent.Required:What is the company's WACC? (Do not round your intermediate calculations.)

The Weighted Average Cost of Capital is the hurdle rate used mainly to capital budgeting decisions.

Answered: о O O 10.45% 9.53% 8.6% 18.13%

Business

Finance

о O O 10.45% 9.53% 8.6% 18.13%

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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Question

O
о
о
O
O
10.45%
9.53%
8.6%
18.13%
9.07%

Filer Manufacturing has 8 million shares of common stock outstanding. The current share
price is $74, and the book value per share is $5. Filer Manufacturing also has two bond
issues outstanding. The first bond issue has a face value of $80 million, has a 9 percent
coupon, and sells for 95 percent of par. The second issue has a face value of $60
million, has a 10 percent coupon, and sells for 108 percent of par. The first issue matures
in 24 years, the second in 8 years.
The most recent dividend was $4.6 and the dividend growth rate is 5 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.
Required:
What is the company's WACC? (Do not round your intermediate calculations.)

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