Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $71,...

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Finance

Dinklage Corp. has 5 million shares of common stock outstanding.The current share price is $71, and the book value per share is$6.
The company also has two bond issues outstanding. The first bondissue has a face value of $65 million, a yield to maturity of 6.35percent, and sells for 96 percent of par. The second issue has aface value of $45 million, a yield to maturity of 5.83 percent, andsells for 105 percent of par. The first issue matures in 21 years,the second in 5 years.
Suppose the most recent dividend was $4.30 and the annualdividend growth rate is 5 percent. The tax rate is 35 percent.Calculate the company’s WACC.
Start by calculating the firm's market value. (Enter your answeras a dollar amount, not millions of dollars, i.e., enter onemillion as 1,000,000).
Firm's Market Value (debt & equity) $_____
Now calculate the firm's cost of equity and after-tax cost ofdebt. (Enter your answers as percent rounded to two decimals.Assume the YTM's are quoted as an EAR, not an APR). Cost of Equity_%
After-tax Cost of Debt %
Now calculate the WACC. (Don't round your intermediate steps andenter your answer as a percent rounded to two decimals).
WACC __%

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4.3 Ratings (713 Votes)

MV of equityPrice of equitynumber of shares outstanding MV of equity715000000 355000000 MV of Bond1Par valuebonds outstandingage of par MV of Bond1100065000096 62400000 MV of Bond2Par valuebonds outstandingage of par MV of See Answer

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