Question

Comida corp. is a grocery store located in the midwest. It paid an annual dividend of $3.00 last year to its shareholders and plans to increase the dividend annually at 4.0% forever. It has 500,000 shares outstanding. The shares currently sell for $21.25 per share. Comida Corp. has 10,000 semiannual bonds outstanding with a coupon rate of 7%, a maturity of 16 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 30%? What is the adjusted WACC for Comida corp. if the corporate tax rate is 30%? % (Round to two decimal places.)

Answer 1

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ke - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Σ AutoSum : A Fill 2 Sort & m Find & Insert Delete Format Cell Styles 2 Clear Filter Editing Select Cells MH M M 500 Calibri -11AA = = = Dr Wrap Text E Copy Paste BIU - D A Merge & Center - Format Painter $ % , :.: Conditional Format Formatting as Table Clipboard Font Alignment Number Styles MF518 fix LZ МА MB MC M D ME ME MG 499 comida PRICE OF BOND 501 coupon 7.0% semi annual 502 FV 1000 503 YEARS 504 NO OF PERIODS 505 COUPON 35 (SEMI ANNUAL] 506 6.00% 507 SEMI ANNUAL YTM 3.00% 508 1 PRICE OF BOND 1101.94 [=PV(MC507,MC504,-MC505,-MC502)] 509 2 ke = COST OF EQUITY 511 DO = 3, g = 4%, PO = 21.25 512 D1 = DO*(1+g) = 3*(1+0.04) = 3.12 16 32 YTM 510 513 ke = D1/PO + g = 3.12/21.25 +0.04 = 18.68% 514 515 516 COST OF DEBT = YTM = 6% AFTER TAX COST OF DEBT = 6%*(1-0.30) = 517 4.20% 518 10l K CALCULATIONLOC IACO KE CAPM UTILITY, SHARPE, beta convexity ferences: CF493 DGM betaport future INDEX INTL CAP BUDLEASING PV, FV, ANNUITY DIR right clean YIELD bond portfolio cap stru WACC BO! 120% RESI el - O- Rea B A .lll 23-11-2019

ke - Microsoft Excel (Product Activation Failed) Add-ins Review View - 2x = = V General Wrap Text Merge Merge & Center - Center Σ AutoSum : A Fill 2 Sort & m Find & SF $ 4:0 .00 :.: Insert Delete Format % % , Number Conditional Format Formatting as Table Styles Cell Styles File Home Insert Page Layout Formulas Data * Cut Calibri 11 A A = E Copy Paste Format Painter BIU - D A Clipboard Font MD527 fic LZ МА MB 519 CALCULATION OF WACC 2 Clear Filter Editing Select Alignment Cells MC MD ME MF MG MH MI MJ 520 SOURCE DEBT COMMON EQUITY NUMBER 10000 500000 MARKET PRICE 1101.94 21.25 MARKET VALUE 11019438.28 10625000 21644438.28 B B*C WEIGHT COC (%) WEIGHTED COST OF EACH SOURCE OF CAPITAL 0.5091 4.20% 2.14% 0.4909 18.68% 9.17% WACC = 11.31% 521 522 523 524 525 526 527 528 529 530 531 532 533 534 535 536 537 538 539 HI Red M convexity DGM betaport future INDEX INTL CAP BUD LEASING PV, FV, ANNUITY DIR right clean YIELD bond portfolio KE CAPM UTILITY, SHARPE, beta ferences: CF493 RESI el 0 cap stru WACC BO! 120% * * O 2. B 9 ENG 23-11-2019