Question

Comida corp. is a grocery store located in the midwest. It paid an annual dividend of $2.80 last year to its shareholders and plans to increase the dividend annually at 2.0% forever. It has 500,000 shares outstanding. The shares currently sell for $16.5 per share. Comida Corp. has 10,000 semiannual bonds outstanding with a coupon rate of 8%, a maturity of 15 years, and a par value of $1,000. The bonds currently have a yield to maturity (YTM) of 6% per bond. What is the adjusted WACC for Comida Corp. if the corporate tax rate is 25%? What is the adjusted WACC for Comida corp. if the corporate tax rate is 25%? % (Round to two decimal places.)

Answer 1

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- 2x Insert Delete Format Cell Styles Σ AutoSum : A Fill Sort & Clear Filter Editing Find & Select Cells MH M M 5 ke - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Calibri -11AA = = = Dr Wrap Text General Ea Copy Paste B I U B- SF A Merge Format Painter Merge & Center - Center $ -% % 4:0 .00 . Conditional Format Formatting as Table Clipboard Font Alignment Number Styles ME497 I LZ MA MB MC MD ME ME MG 496 497 498 499 comida 500 PRICE OF BOND coupon 8.0% semi annual 502 1000 503 YEARS 15 504 NO OF PERIODS 30 COUPON 40 [SEMI ANNUAL] 506 YTM 6.00% 507 SEMI ANNUAL YTM 3.00% 508 1 PRICE OF BOND 1196.00 [=PV(MC507,MC504,-MC505,-MC502)] 501 505 509 510 511 512 2 ke = COST OF EQUITY DO = 2.80, g = 2%, PO = 16.5 D1 = DO*(1+g) = 2.80*(1+0.02) = 2.856 513 ke = D1/PO + g = 2.856/16.5 +0.02 = 19.31% 514 515 H M betaport future INDEX INTL CAP BUD SANDRINE LEASING PV, FV, ANNUITY_DIR right clean YIELD bond portfolio Convexity DGM ferences: CF670 WACC RESI DIV POLICY NAME BOU 120% B 9 . * DIV YIELD I- 1 Red + 2. ENG 24-11-2019

ke - Microsoft Excel (Product Activation Failed) Add-Ins - 2x General Wrap Text Merge Merge & Center - Center $ 4:0 .00 :.: Insert Delete Format % % , Number Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Cells File Home Insert Page Layout Formulas Data Review View % Cut Calibri -11AA = = = Dr E Copy Paste BIU - D A SF Format Painter Clipboard Font Alignment MG515 f x LZ MA MB MC 515 516 3 COST OF DEBT = YTM = 6% AFTER TAX COST OF DEBT = 6%*(1-0.25) = MD ME ME MG мн MI MI 517 4.50% 518 CALCULATION OF WACC 519 520 521 522 523 SOURCE DEBT COMMON EQUITY NUMBER 10000 500000 MARKET PRICE 1196.00 16.5 MARKET VALUE 11960044.13 8250000 20210044.13 B*C WEIGHT COC (%) WEIGHTED COST OF EACH SOURCE OF CAPITAL 0.5918 4.50% 2.66% 0.4082 19.31% 7.88% 524 WACC = 10.55% 525 526 527 528 529 530 531 532 533 534 535 H M betaport future INDEX INTL CAP BUD SANDRINE LEASING PV, FV, ANNUITY_DIR right clean YIELD bond portfolio Convexity DGM ferences: CF670 Rea WACC RESI DIV POLICY NAME BOJ 120% E . * DIV YIELD I- - O ENG 08:48 24-11-2019 D .