5SkippedeBookHintPrintDani Corporation has 6 million shares of common stock outstanding. The current shareprice is $78, and the book value per share is $9. The company also has two bond issuesoutstanding. The first bond issue has a face value of $115 million, a coupon rate of 7percent, and sells for 93 percent of par. The second issue has a face value of $100million, a coupon rate of 6 percent, and sells for 105 percent of par. The first issuematures in 21 years, the second in 8 years.Suppose the most recent dividend was $4.70 and the dividend growth rate is 5.3percent. Assume that the overall cost of debt is the weighted average of that implied bythe two outstanding debt issues. The tax rate is 24 percent. What is the company'sWACC? (Do not round intermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)WACCReferences%

To calculate the Weighted Average Cost of Capital (WACC), we need to find the cost of equity and the…

Answered: 5 Skipped eBook Hint Print Dani…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Chapter 10 Homework A Saved Help Save & Exit Submit Check my work 7 Finishing Touches has two classes of stock authorized: 7%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2021, its first year of operations: January 2 Issues 100,000 shares of common stock for $24 per share. February 6 Issues 1,900 shares of 78 preferred stock for $13 per share. September 10 Purchases 12,000 shares of its own common stock for $29 per share. December 15 Resells 6,000 shares of treasury stock at $34 per share. 2 points In its first year of operations, Finishing Touches has net income of $149,000 and pays dividends at the end of the year of $94,000 ($1 per share) on all common shares outstanding and $1,330 on all preferred shares outstanding. eBook Required: Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.) Hint FINISHING…
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Common stock versus warrant investment Personal Finance Problem Tom Baldwin can invest $4,000 in the common stock or the warrants of Lexington Life Insurance. The common stock is currently selling for $50 per share. Its warrants, which provide for the purchase of 3 shares of common stock at $48 per share, are currently selling for $12. The stock is expected to rise to a market price of $53 within the next year, so the expected theoretical value of a warrant over the next year is $15. The expiration date of the warrant is one year from the present. a. If Mr. Baldwin purchases the stock, holds it for one year, and then sells it for $53, what is his total gain? (Ignore brokerage fees and taxes.) b. If Mr. Baldwin purchases the warrants and converts them to common stock in 1 year, what is his total gain if the market price of common shares is actually $53? (Ignore brokerage fees and taxes.) c. Repeat parts a and b, assuming that the market price of the stock in one year is $49. d. Discuss…
9
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QUESTION 3 CER Corporation has 8.75 million shares of common stock outstanding, 215,000 sharesof RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annualbond outstanding. The common stock is currently sells for RM34 per share and has abeta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills areyielding 5%, and corporate tax rate is 35%. Calculate the following:(a) Firm’s market value capital structure.(b) Cost of equity.(c) Cost of preferred stock Thank you
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