Bolster Foods (BF) balance sheet shows a total of $25 million long-term debt with a...
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Bolster Foods (BF) balance sheet shows a total of $25 million long-term debt with a coupon rate of 8.50%. The yield to maturity on this debt is 8.00%, and the debt has a total current market value of $27 million. The balance sheet also shows that the company has 10 million shares of stock, and the stock has a book value per share of $5.00. The current stock price is $20.00 per share, and stockholders' required rate of return, r s , is 12.25%. The company recently decided that its target capital structure should have 35% debt, with the balance being common equity. The tax rate is 25%. Calculate WACCs based on book, market, and target capital structures, and then find the sum of these three WACCs. Do not round your intermediate calculations.
a. 31.08%
b. 31.73%
c. 12.68%
d. 38.16%
e. 18.90%
Bolster Foods (BF) balance sheet shows a total of $25 million long-term debt with a coupon rate of 8.50%. The yield to maturity on this debt is 8.00%, and the debt has a total current market value of $27 million. The balance sheet also shows that the company has 10 million shares of stock, and the stock has a book value per share of $5.00. The current stock price is $20.00 per share, and stockholders' required rate of return, r s , is 12.25%. The company recently decided that its target capital structure should have 35% debt, with the balance being common equity. The tax rate is 25%. Calculate WACCs based on book, market, and target capital structures, and then find the sum of these three WACCs. Do not round your intermediate calculations.
| a. | 31.08% | |
| b. | 31.73% | |
| c. | 12.68% | |
| d. | 38.16% | |
| e. | 18.90% |
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