Dani Corporation has 5 million shares of common stock outstanding. The current shareprice is $71, and the book value per share is $10. The company also has two bond issuesoutstanding. The first bond issue has a face value of $80 million, a coupon rate of 4percent, and sells for 96 percent of par. The second issue has a face value of $65million, a coupon rate of 3 percent, and sells for 108 percent of par. The first issuematures in 20 years, the second in 9 years.Suppose the most recent dividend was $4.35 and the dividend growth rate is 4.6percent. Assume that the overall cost of debt is the weighted average of that implied bythe two outstanding debt issues. The tax rate is 22 percent. What is the company'sWACC? (Do not round intermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)WACC%

To calculate the Weighted Average Cost of Capital (WACC), we need to determine the cost of equity…

Answered: Dani Corporation has 5 million shares…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 14P

See similar textbooks

Similar questions

Masterson, Inc., has 7 million shares of common stock outstanding. The current share price is $73, 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 $90 million, has a coupon rate of 6 percent, and sells for 98 percent of par. The second issue has a face value of $75 million, has a coupon rate of 5 percent, and sells for 110 percent of par. The first issue matures in 22 years, the second in 7 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant, the book or market value weights?
Masterson, Inc., has 8 million shares of common stock outstanding. The current share price is $82, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $135 million, has a coupon rate of 7 percent, and sells for 93 percent of par. The second issue has a face value of $120 million, has a coupon rate of 6 percent, and sells for 102 percent of par. The first issue matures in 25 years, the second in 9 years. Both bonds make semiannual coupon payments. What are the company's capital structure weights on a book value basis? Equity/Value ___________ Debt/Value ____________ What are the company's capital structure weights on a market value basis? Equity/Value __________ Debt/Value ___________
Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $77, 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 $60 million, a coupon rate of 6 percent, and sells for 97 percent of par. The second issue has a face value of $30 million, a coupon rate of 7 percent, and sells for 105 percent of par. The first issue matures in 21 years, the second in 4 years. Suppose the most recent dividend was $4.90 and the dividend growth rate is 6 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 40 percent. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC _________%
Dani Corporation has 6 million shares of common stock outstanding. The current share price is $66, 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 $55 million, has a coupon rate of 6 percent, and sells for 91 percent of par. The second issue has a face value of $40 million, has a coupon rate of 5 percent, and sells for 103 percent of par. The first issue matures in 21 years, the second in 6 years. Suppose the most recent dividend was $4.10 and the dividend growth rate is 4.1 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 22 percent. What is the company’s WACC?
Dani Corporation has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $9. The company also has two bond issues outstanding. The first bond issue has a face value of $85 million, a coupon rate of 5 percent, and sells for 97 percent of par. The second issue has a face value of $70 million, a coupon rate of 4 percent, and sells for 109 percent of par. The first issue matures in 21 years, the second in 8 years. Suppose the most recent dividend was $4.40 and the dividend growth rate is 4.7 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. The tax rate is 23 percent. What is the company’s WACC?
Dineage Corporation has 5 million shares of common stock outstanding. The current share price is $84, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $60 million, has a 7 percent coupon, and sells for 94 percent of par. The second issue has a face value of $35 million, has a 8 percent coupon, and sells for 107 percent of par. The first issue matures in 22 years, the second in 4 years. The most recent dividend was $5.6 and the dividend growth rate is 8 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 35 percent. What is the company's WACC?
Erna Corp. has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $8. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $80 million, has a coupon of 10 percent, and sells for 96 percent of par. The second issue has a face value of $50 million, has a coupon of 11 percent, and sells for 104 percent of par. The first issue matures in 25 years, the second in 8 years. suppose the most recent dividend was $5.30 and the dividend growth rate was 5%. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. both bonds make semi-annual payments. The tax rate is 35%. what is the company's WACC.
Dinklage Corporation has 9 million shares of common stock outstanding. The current share price is $88, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million, has a 5 percent coupon, and sells for 98 percent of par. The second issue has a face value of $55 million, has a 6 percent coupon, and sells for 106 percent of par. The first issue matures in 20 years, the second in 8 years. The most recent dividend was $6 and the dividend growth rate is 8 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 38 percent. What is the company's WACC?
Pandora Manufacturing has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million and a coupon rate of 7 percent and sells for 97 percent of par. The second issue has a face value of $50 million and a coupon rate of 8 percent and sells for 106 percent of par. The first issue matures in 22 years, the second in 6 years. a. What are the company’s capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant, the book or market value weights? a. Equity/Value: Debt/Value: b. Equity/Value: Debt/Value: c.More relevant:
Titan Mining Corporation has 6.8 million shares of common stock outstanding, 245,000 shares of 4.1 percent preferred stock outstanding, and 130,000 bonds with a semiannual coupon rate of 5.8 percent outstanding, par value $1,000 each. The common stock currently sells for $68 per share and has a beta of 1.20, the preferred stock has a par value of $100 and currently sells for $88 per share, and the bonds have 17 years to maturity and sell for 106 percent of par. The market risk premium is 7.6 percent, T-bills are yielding 3.6 percent, and the company’s tax rate is 23 percent. a. What is the firm’s market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. If the company is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows? (Do not round intermediate calculations enter your answer as a percent…
A corporation has 7 million shares of common stock outstanding. The current share price is $68, 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 $70 million, a coupon rate of 6 percent, and sells for 97 percent of par. The second issue has a face value of $40 million, a coupon rate of 6.5 percent, and sells for 108 percent of par. The first issue matures in 21 years, the second in 6 years. Assume the most recent dividend was $3.25 and the dividend growth rate is 5 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 21 percent. What is the company’s WACC?
Titan Mining Corporation has 7.6 million shares of common stock outstanding, 280,000 shares of 4.5 percent preferred stock outstanding, and 165,000 bonds with a semiannual coupon rate of 5.9 percent outstanding, par value $2,000 each. The common stock currently sells for $61 per share and has a beta of 1.15, the preferred stock has a par value of $100 and currently sells for $95 per share, and the bonds have 19 years to maturity and sell for 109 percent of par. The market risk premium is 7.1 percent, T-bills are yielding 3.5 percent, and the company’s tax rate is 25 percent. a. What is the firm’s debt, preferred stock and equity? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. If the company is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows? (Do not round intermediate calculations enter your answer as a percent…

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS