Dinklage Corp. has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $8.
The company also has two bond issues outstanding. The first bond issue has a face value of $80 million, a yield to maturity of 10.45 percent, and sells for 96 percent of par. The second issue has a face value of $50 million, a yield to maturity of 10.26 percent, and sells for 104 percent of par. The first issue matures in 25 years, the second in 8 years.
Suppose the most recent dividend was $5.30 and the dividend 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 answer as a dollar amount, not millions of dollars, i.e. enter one million as 1,00,000)
Firm's Market Value (debt & equity) $
Now calculate the firm's cost of equity and after-tax cost of debt.
(Enter your answers as percent rounded to two decimals. Assume the YTMs 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 and enter your answer as a percent rounded to two decimals.)
WACC %