Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $86,...

70.2K

Verified Solution

Question

Finance

Dinklage Corp. has 7 million shares of common stock outstanding.The current share price is $86, and the book value per share is $5.The company also has two bond issues outstanding. The first bondissue has a face value of $70 million, a coupon rate of 9 percent,and sells for 96 percent of par. The second issue has a face valueof $45 million, a coupon rate of 10 percent, and sells for 104percent of par. The first issue matures in 24 years, the second in6 years. Suppose the most recent dividend was $5.80 and thedividend growth rate is 7 percent. Assume that the overall cost ofdebt is the weighted average of that implied by the two outstandingdebt issues. Both bonds make semiannual payments. The tax rate is34 percent. What is the company’s WACC? (Do not round intermediatecalculations. Enter your answer as a percent rounded to 2 decimalplaces, e.g., 32.16.)
WACC---- %

Answer & Explanation Solved by verified expert

3.9 Ratings (622 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Dinklage Corp. has 7 million shares of common stock outstanding.The current share price is $86, and the book value per share is $5.The company also has two bond issues outstanding. The first bondissue has a face value of $70 million, a coupon rate of 9 percent,and sells for 96 percent of par. The second issue has a face valueof $45 million, a coupon rate of 10 percent, and sells for 104percent of par. The first issue matures in 24 years, the second in6 years. Suppose the most recent dividend was $5.80 and thedividend growth rate is 7 percent. Assume that the overall cost ofdebt is the weighted average of that implied by the two outstandingdebt issues. Both bonds make semiannual payments. The tax rate is34 percent. What is the company’s WACC? (Do not round intermediatecalculations. Enter your answer as a percent rounded to 2 decimalplaces, e.g., 32.16.)WACC---- %