Big Door Company has 8.2 million shares outstanding, which are currently trading for about $17...
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Big Door Company has 8.2 million shares outstanding, which are currently trading for about $17 per share and have a levered equity beta of 1.4. Big Door has 20,200 outstanding bonds, with a 4% coupon rate, payable semi-annually and due in 10 years. The bonds are rated BBB. Currently the credit spread for BBB is 175 basis points over equivalent-maturity Government of Canada debt. The current yield on 10-year Canada bonds is 5%, compounded semi-annually. The risk-free interest rate is 2.4%, and the market risk premium is 6.6%. The company has a 35% tax rate. (Do not round intermediate calculations.) a. Calculate Big Door's WACC. (Round your answer to 2 decimal places.) WACC % b. Calculate Big Door's unlevered beta, using the following formula: (Round your answer to 2 decimal places.) Bu = Bevered +Bdebe X (1-T.)XDIE 1+(1-T.)DIE Unlevered beta c. If Big Door was 50% debt-financed, what would be its WACC? Assume that the beta of its debt is unchanged by the capital structure change. (Round your answer to 2 decimal places.) WACC Big Door Company has 8.2 million shares outstanding, which are currently trading for about $17 per share and have a levered equity beta of 1.4. Big Door has 20,200 outstanding bonds, with a 4% coupon rate, payable semi-annually and due in 10 years. The bonds are rated BBB. Currently the credit spread for BBB is 175 basis points over equivalent-maturity Government of Canada debt. The current yield on 10-year Canada bonds is 5%, compounded semi-annually. The risk-free interest rate is 2.4%, and the market risk premium is 6.6%. The company has a 35% tax rate. (Do not round intermediate calculations.) a. Calculate Big Door's WACC. (Round your answer to 2 decimal places.) WACC % b. Calculate Big Door's unlevered beta, using the following formula: (Round your answer to 2 decimal places.) Bu = Bevered +Bdebe X (1-T.)XDIE 1+(1-T.)DIE Unlevered beta c. If Big Door was 50% debt-financed, what would be its WACC? Assume that the beta of its debt is unchanged by the capital structure change. (Round your answer to 2 decimal places.) WACC
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