Pandora Manufacturing has 8.4 million shares of common stock outstanding. The current share price is $54, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $70.2 million and a coupon rate of 7.1 percent and sells for 108.2 percent of par. The second issue has a face value of $60.2 million and a coupon rate of 7.6 percent and sells for 109.1 percent of par. The first issue matures in 9 years, the second in 26 years. The company's stock has a beta of 1.3. The risk-free rate is 3.2 percent, and the market risk premium is 7.1 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 21 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 %

Essentials Of Investments
11th Edition
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Pandora Manufacturing has 8.4 million shares of common stock outstanding. The current
share price is $54, and the book value per share is $5. The company also has two bond
issues outstanding. The first bond issue has a face value of $70.2 million and a coupon
rate of 7.1 percent and sells for 108.2 percent of par. The second issue has a face value of
$60.2 million and a coupon rate of 7.6 percent and sells for 109.1 percent of par. The first
issue matures in 9 years, the second in 26 years.
The company's stock has a beta of 1.3. The risk-free rate is 3.2 percent, and the market
risk premium is 7.1 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 21 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
%
Transcribed Image Text:Pandora Manufacturing has 8.4 million shares of common stock outstanding. The current share price is $54, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $70.2 million and a coupon rate of 7.1 percent and sells for 108.2 percent of par. The second issue has a face value of $60.2 million and a coupon rate of 7.6 percent and sells for 109.1 percent of par. The first issue matures in 9 years, the second in 26 years. The company's stock has a beta of 1.3. The risk-free rate is 3.2 percent, and the market risk premium is 7.1 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 21 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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