Tysseland Company’s market and book value capital structures are shown below. There are no preferred stock and short-term debt: Capital Component Market value Book Value Debt $5,000,000 $5,000,000 Common equity $60,000,000 $40,000,000 Bonds have an 8% coupon rate, and they sell at par. Common stock is currently selling at $30 a share. The stockholder’s required rate of return is estimated to be 12%, consisting of a dividend yield of 4% and an expected growth rate of 8%. (The next expected dividend is $1.20, so the dividend yield is $1.20/$30 = 4%.) The marginal tax rate is 40%. What is Tysseland’s WACC?
Tysseland Company’s market and book value capital structures are shown below. There are no preferred stock and short-term debt: Capital Component Market value Book Value Debt $5,000,000 $5,000,000 Common equity $60,000,000 $40,000,000 Bonds have an 8% coupon rate, and they sell at par. Common stock is currently selling at $30 a share. The stockholder’s required rate of return is estimated to be 12%, consisting of a dividend yield of 4% and an expected growth rate of 8%. (The next expected dividend is $1.20, so the dividend yield is $1.20/$30 = 4%.) The marginal tax rate is 40%. What is Tysseland’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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- ) Tysseland Company’s market and book value capital structures are shown below. There are no
preferred stock and short-term debt:
|
Capital Component |
Market value |
Book Value |
|
Debt |
$5,000,000 |
$5,000,000 |
|
Common equity |
$60,000,000 |
$40,000,000 |
Bonds have an 8% coupon rate, and they sell at par. Common stock is currently selling at $30 a share. The stockholder’s required
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