Dinklage Corp. has 8 million shares of common stock outstanding. The current share price is $82,...

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Dinklage Corp. 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 bondissue has a face value of $135 million, a coupon rate of 7 percent,and sells for 93 percent of par. The second issue has a face valueof $120 million, a coupon rate of 6 percent, and sells for 102percent of par. The first issue matures in 25 years, the second in9 years. Suppose the most recent dividend was $4.90 and thedividend growth rate is 5.4 percent. Assume that the overall costof debt is the weighted average of that implied by the twooutstanding debt issues. Both bonds make semiannual payments. Thetax rate is 23 percent. What is the company’s WACC

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3.7 Ratings (310 Votes)

MV of equityPrice of equitynumber of shares outstanding MV of equity828000000 656000000 MV of Bond1Par valuebonds outstandingage of par MV of Bond11000135000093 125550000 MV of Bond2Par valuebonds outstandingage of par MV of Bond21000120000102 See Answer

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Dinklage Corp. 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 bondissue has a face value of $135 million, a coupon rate of 7 percent,and sells for 93 percent of par. The second issue has a face valueof $120 million, a coupon rate of 6 percent, and sells for 102percent of par. The first issue matures in 25 years, the second in9 years. Suppose the most recent dividend was $4.90 and thedividend growth rate is 5.4 percent. Assume that the overall costof debt is the weighted average of that implied by the twooutstanding debt issues. Both bonds make semiannual payments. Thetax rate is 23 percent. What is the company’s WACC