Your company had these balances on its balance sheet at the end of the last fiscal year: $65,000,000 15,000,000 40,000,000 15,000,000 37,500,000 Long-term debt Preferred stock Common stock Paid in excess Retained earnings The company's long-term debt is comprised of 20-year $1000 face value bonds issued 7 years ago at an 8% coupon rate. The bonds are now selling to yield 6%. Willerton's preferred is from a single issue of $100 par value, 9% preferred stock that is now selling to yield 8%. Willerton has 4 million shares of common stock outstanding at a current market price of $31. Assume the firm's cost of retained earnings is 17% and its marginal tax rate is 36%. Assume that the coupon payments are semi-annual. Calculate its WACC using its book-value-based capital structure ignoring flotation costs. Round the answer to two decimal places. Do not round your intermediate calculations. Do not include the "%". Make the same calculation using the market-value-based capital structure. Round the answer to two decimal places. Do not round your intermediate calculations. Do not include the "%". Hint: These two WACCs should be similar.

Your company had these balances on its balance sheet at the end of the last fiscal year: $65,000,000 15,000,000 40,000,000 15,000,000 37,500,000 Long-term debt Preferred stock Common stock Paid in excess Retained earnings The company's long-term debt is comprised of 20-year $1000 face value bonds issued 7 years ago at an 8% coupon rate. The bonds are now selling to yield 6%. Willerton's preferred is from a single issue of $100 par value, 9% preferred stock that is now selling to yield 8%. Willerton has 4 million shares of common stock outstanding at a current market price of $31. Assume the firm's cost of retained earnings is 17% and its marginal tax rate is 36%. Assume that the coupon payments are semi-annual. Calculate its WACC using its book-value-based capital structure ignoring flotation costs. Round the answer to two decimal places. Do not round your intermediate calculations. Do not include the "%". Make the same calculation using the market-value-based capital structure. Round the answer to two decimal places. Do not round your intermediate calculations. Do not include the "%". Hint: These two WACCs should be similar.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 19MC: Gingko Inc. issued bonds with a face value of $100,000, a rate of 7%, and a 10-yearterm for...

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Question

Your company had these balances on its balance sheet at the end of the last fiscal year:
$65,000,000
15,000,000
40,000,000
15,000,000
37,500,000
Long-term debt
Preferred stock
Common stock
Paid in excess
Retained earnings
The company's long-term debt is comprised of 20-year $1000 face value bonds issued 7 years ago at an 8% coupon rate. The
bonds are now selling to yield 6%. Willerton's preferred is from a single issue of $100 par value, 9% preferred stock that is now
selling to yield 8%. Willerton has 4 million shares of common stock outstanding at a current market price of $31.
Assume the firm's cost of retained earnings is 17% and its marginal tax rate is 36%. Assume that the coupon payments are
semi-annual.
Calculate its WACC using its book-value-based capital structure ignoring flotation costs. Round the answer to two decimal
places. Do not round your intermediate calculations. Do not include the "%".
%
Make the same calculation using the market-value-based capital structure. Round the answer to two decimal places. Do not
round your intermediate calculations. Do not include the "%".
%
Hint: These two WACCs should be similar.

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