Question

Saved Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $73, 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 $90 million, a coupon rate of 6 percent, and sells for 98 percent of par. The second issue has a face value of $75 million, a coupon rate of 5 percent, and sells for 110 percent of par. The first issue matures in 22 years, the second in 7 years. Suppose the most recent dividend was $4.45 and the dividend growth rate is 4.8 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 24 percent What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC
the answer currently in the box is not correct.

Answer 1

6% Coupon nper pmt Recent dividend growtha rate price today 44 22*2 ov (DO*(1+g)/PO)+g (4.45*(1+0.048)/73)+0.048 0.1119 11.19% 30 1000*6%*1/2 -9801000*98% 1000 Rate(nper,pmt, pv, fv) RATE(44,30,-980, 1000) 3.08% 3.08%*2 6.17% ytm ytm p.a After tax debt 0.0617*(1-0.24) Weight 0.51670 0.48330 6% Coupon 5% Coupon 0.04687 cost 0.04687 0.02456 90000000*98% 75000000*110% 4.687% Market value $ 88,200,000.00 $ 82,500,000.00 $ 170,700,000.00 product 0.02422 0.01187 0.03609 5% Coupon nper pmt py Debt Equity Market value $ 170,700,000.00 $ 511,000,000.00 $681,700,000.00 weight 0.25040 0.74960 cost 0.0361 0.1119 WACC WACC 7000000*73 147*2 25 1000*5%*1/2 -1110 1000*110% 1000 RATE(14,25,-1110, 1000) 1.62% 0.0323153 product 0.0090 0.0839 0.0929 9.29% ytm ytm p.a Wacc 9.29% After tax debt 0.0323153*(1-0.24) 0.02456 2.456%