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Essentials Of Investments
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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O о о O O 10.45% 9.53% 8.6% 18.13% 9.07%
Transcribed Image Text:O о о O O 10.45% 9.53% 8.6% 18.13% 9.07%
Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $74, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $80 million, has a 9 percent coupon, and sells for 95 percent of par. The second issue has a face value of $60 million, has a 10 percent coupon, and sells for 108 percent of par. The first issue matures in 24 years, the second in 8 years. The most recent dividend was $4.6 and the dividend growth rate is 5 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 35 percent. Required: What is the company's WACC? (Do not round your intermediate calculations.)
Transcribed Image Text:Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $74, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $80 million, has a 9 percent coupon, and sells for 95 percent of par. The second issue has a face value of $60 million, has a 10 percent coupon, and sells for 108 percent of par. The first issue matures in 24 years, the second in 8 years. The most recent dividend was $4.6 and the dividend growth rate is 5 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 35 percent. Required: What is the company's WACC? (Do not round your intermediate calculations.)
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