Johnny Cake Limited has 10 million shares of stock outstanding selling at $22 per share and an issue of $50 million in 8 percent annual coupon bonds with a maturity of 18 years, selling at 90.5 percent of par. Assume Johnny Cake's weighted-average tax rate is 21 percent, it cannot make use of interest tax shields for the foreseeable future, its next dividend is expected to be $3 per share, and all future dividends are expected to grow at 4 percent per year, indefinitely. What is its WACC? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places

Johnny Cake Limited has 10 million shares of stock outstanding selling at $22 per share and an issue of $50 million in 8 percent annual coupon bonds with a maturity of 18 years, selling at 90.5 percent of par. Assume Johnny Cake's weighted-average tax rate is 21 percent, it cannot make use of interest tax shields for the foreseeable future, its next dividend is expected to be $3 per share, and all future dividends are expected to grow at 4 percent per year, indefinitely. What is its WACC? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places

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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Johnny Cake Limited has 12 million shares of stock outstanding selling at $17 per share and an issue of $60 million in 9 percent annual coupon bonds with a maturity of 18 years, selling at 91.5 percent of par. Assume Johnny Cake's weighted-average tax rate is 21 percent, it cannot make use of interest tax shields for the foreseeable future, its next dividend is expected to be $3 per share, and all future dividends are expected to grow at 6 percent per year, indefinitely. What is its WACC? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. WACC___________%
TAFKAP Industries has 3 million shares of stock outstanding selling at $17 per share, and an issue of $20 million in 7.5 percent annual coupon bonds with a maturity of 15 years, selling at 106 percent of par. Assume TAFKAP’s weighted average tax rate is 21 percent, it can make full use of the interest tax shield, and its cost of equity is 14.5 percent.What is TAFKAP’s WACC? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) WACC ____ %
Johnny Cake Ltd. has 12 million shares of stock outstanding selling at $21 per share and an issue of $60 million in 8 percent annual coupon bonds with a maturity of 17 years, selling at 94.5 percent of par. Assume Johnny Cake's weighted-average tax rate is 21 percent, its next dividend is expected to be $3 per share, and all future dividends are expected to grow at 4 percent per year, indefinitely. What is its WACC? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) WACC 10.90%
TAFKAP Industries has 3 million shares of stock outstanding selling at $17 per share, and an issue of $20 million in 7.5 percent annual coupon bonds with a maturity of 15 years, selling at 106 percent of par. Assume TAFKAP’s weighted average tax rate is 21 percent, it can make full use of the interest tax shield, and its cost of equity is 14.5 percent. What is TAFKAP’s WACC?
The GIN Corp. is expected to pay a dividend of S3 which is expected to grow at 2% for a foreseeable future. The stock of the GiN Corp. is currently selling at a market price of $40. The company recently expanded its operations by issuing 10-year Corporate bond at par value ($1,000) which pays an annual coupon payment of 580. If the debt-equity ratio of the company is 0.40 and the corporate tax rate is 30%. what is the weighted average cost of capital of the company? Calculate the weighted average cost of capital. (A) The weighted average cost of capital is 9.50% (B) The weighted average cost of capital is 8.39% (C) The weighted average cost of capital is S.00% (D) The weighted average cost of capital is 5.60%
Maynard Steel plans to pay a dividend of $2.89 this year. The company has an expected earnings growth rate of 3.7% per year and an equity cost of capital of 10.9%. a. Assuming Maynard's dividend payout rate and expected growth rate remain constant, and Maynard does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $0.98 this year and use the remaining $1.91 per share to repurchase shares. If Maynard's total payout rate remainsconstant, estimate Maynard's share price. c. If Maynard maintains the same split between divdends and repurchases, and the same payout rate, as in part (b), at what rate are Maynard's dividends, earnings pershare, and share price expected to grow in the future? Note: The share price is expected to also grow at the same rate as dividends and earnings per share.
Maynard Steel plans to pay a dividend of $3.15 this year. The company has an expected earnings growth rate of 3.5% per year and an equity cost of capital of 9.5%. Assuming that Maynard's dividend payout rate and expected growth rate remainconstant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. Suppose Maynard decides to pay a dividend of$1.09 this year and use the remaining $2.06 per share to repurchase shares. If Maynard's total payout rate remains constant, estimate Maynard's share price.
RST Ltd. Is currently selling common stock for $90 par share. The firm expects to pay cash dividend of $7 par share next year. The firm’s dividend has been growing at an annual rate of 6%, and is expected to continue into the future. The flotation cost is expected to amount to $5 par share and a discount of $7 par share is also offered. The firm can sell an unlimited amount of new common stock under these terms. i) Compute the cost of common stock.
Maynard Steel plans to pay a dividend of $3.18 this year. The company has an expected earnings growth rate of 4.5% per year and an equity cost of capital of 10.8%. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $1.08 this year and use the remaining $2.10 per share to repurchase shares. If Maynard's total payout rate remains constant, estimate Maynard's share price. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. Maynard's share price will be $. (Round to the nearest cent.)
The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable futuré. The stock of the GiN Corp. is currently selling at a market price of $40. The company recently expanded its operations by issuing 10-year Corporate bond at par value ($1,000) which pays an annual coupon payment of $80. If the debt-equity ratio of the company is 0.40 and the corporate tax rate is 30%, what is the weighted average cost of capital of the company? Calculate the weighted average cost of capital. (A) The weighted average cost of capital is 9.50% (B) The weighted average cost of capital is 8.39% (C) The weighted average cost of capital is 8.00% (D) The weighted average cost of capital is 5.60% Answer Activate Windows Go to Settings to activate Windows C Type here to search ENG 00:18 4の IN 02-11-2020 A B 00
The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable future. The stock of the GİN Corp. is currently selling at a market price of $40. The company recently expanded its operations by issuing 10-year Corporate bond at par value ($1,000) which pays an annual coupon payment of $80. If the debt-equity ratio of the company is 0.40 and the corporate tax rate is 30%, what is the weighted average cost of capital of the company? Calculate the weighted average cost of capital. (A) The weighted average cost of capital is 9.50% (B) The weighted average cost of capital is 8.39% (C) The weighted average cost of capital is 8.00% (D) The weighted average cost of capital is 5.60%
Maynard Steel plans to pay a dividend of $3.00 this year. The company has an expected earnings growth rate of 4.0% per year and an equity cost of capital of 10.0%. a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant, and that the firm does not issue or repurchase shares, estimate Maynard's share price. b. Suppose Maynard decides to pay a dividend of $1.00 this year and use the remaining $2.00 per share to repurchase shares. If Maynard's total payout rate remains constant, estimate Maynard's share price.

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