Pandora Manufacturing has 7.5 million shares of common stock outstanding share price is $45, and the book value per share is $4. The company also ha issues outstanding. The first bond issue has a face value of $68.4 million an rate of 6.2 percent and sells for 109.1 percent of par. The second issue has a of $58.4 million and a coupon rate of 6.7 percent and sells for 107.3 percent first issue matures in 8 years, the second in 27 years. The company's stock has a beta of 1.3. The risk-free rate is 2.3 percent, and risk premium is 6.2 percent. Assume that the overall cost of debt is the weig average implied by the two outstanding debt issues. Both bonds make semi payments. The tax rate is 23 percent. What is the company's WACC? (Do no
Pandora Manufacturing has 7.5 million shares of common stock outstanding share price is $45, and the book value per share is $4. The company also ha issues outstanding. The first bond issue has a face value of $68.4 million an rate of 6.2 percent and sells for 109.1 percent of par. The second issue has a of $58.4 million and a coupon rate of 6.7 percent and sells for 107.3 percent first issue matures in 8 years, the second in 27 years. The company's stock has a beta of 1.3. The risk-free rate is 2.3 percent, and risk premium is 6.2 percent. Assume that the overall cost of debt is the weig average implied by the two outstanding debt issues. Both bonds make semi payments. The tax rate is 23 percent. What is the company's WACC? (Do no
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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![Pandora Manufacturing has 7.5 million shares of common stock outstanding. The current
share price is $45, and the book value per share is $4. The company also has two bond
issues outstanding. The first bond issue has a face value of $68.4 million and a coupon
rate of 6.2 percent and sells for 109.1 percent of par. The second issue has a face value
of $58.4 million and a coupon rate of 6.7 percent and sells for 107.3 percent of par. The
first issue matures in 8 years, the second in 27 years.
The company's stock has a beta of 1.3. The risk-free rate is 2.3 percent, and the market
risk premium is 6.2 percent. Assume that the overall cost of debt is the weighted
average implied by the two outstanding debt issues. Both bonds make semiannual
payments. The tax rate is 23 percent. What is the company's WACC? (Do not round
intermediate calculations and enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)
WACC
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F603370b6-4182-4ece-8872-0de1afcf1a14%2Fefa9a9ff-aeb2-429e-9edf-da812f12fa5b%2Fm9z31ev_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Pandora Manufacturing has 7.5 million shares of common stock outstanding. The current
share price is $45, and the book value per share is $4. The company also has two bond
issues outstanding. The first bond issue has a face value of $68.4 million and a coupon
rate of 6.2 percent and sells for 109.1 percent of par. The second issue has a face value
of $58.4 million and a coupon rate of 6.7 percent and sells for 107.3 percent of par. The
first issue matures in 8 years, the second in 27 years.
The company's stock has a beta of 1.3. The risk-free rate is 2.3 percent, and the market
risk premium is 6.2 percent. Assume that the overall cost of debt is the weighted
average implied by the two outstanding debt issues. Both bonds make semiannual
payments. The tax rate is 23 percent. What is the company's WACC? (Do not round
intermediate calculations and enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)
WACC
%
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