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
Raghubhai
Transcribed Image Text:Dani Corporation has 7 million shares of common stock outstanding. The
current share price is $83, and the book value per share is $8. The company
also has two bond issues outstanding. The first bond issue has a face value
of $140 million, has a coupon rate of 6 percent, and sells for 94 percent of
par. The second issue has a face value of $125 million, has a coupon rate of
5 percent, and sells for 105 percent of par. The first issue matures in 25
years, the second in 8 years.
Suppose the most recent dividend was $4.95 and the dividend growth rate
is 4.9 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 24 percent. What is the company's
WACC?
Note: 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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