Hollydale's is a clothing store in East Park. It paid an annual dividend of $1.80 last year to its shareholders and plans to increase the dividend annually at 4.0%. It has 600,000 shares outstanding. The shares currently sell for $18.84 per share. Hollydale's has 20,000 semiannual bonds outstanding with a coupon rate of 6.5%, a maturity of 15 years, and a par value of $1,000. The bonds are currently selling for $870.31 per bond. What is the adjusted WACC for Hollydale's if the corporate tax rate is 40%?
Bonds rate:
Calculator | |
Inputs: | |
PV | (870.310) |
PMT | 32.5 |
FV | 1,000.00 |
N | 30 |
Output: | |
I/Y = YTM | 4.00% |
Annual rate | 8.00% |
After tax interest rate | 4.800% |
Type | Capital (market value) | % of total capital | × Required return after tax | WACC |
Common stock | $ 11,304,000 | 39.37% | 13.936% | 5.49% |
Bonds | $ 17,406,200 | 60.63% | 18.000% | 4.80% |
WACC | $ 28,710,200 | 10.287% |
WACC is 10.29%
please rate.
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