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 ________%
