Calculate the weighted average cost of capital for the following Dunkie company (WACC). The Dunkie company's bond is currently selling for 102% of par. The bond is a semi-annual, 20-year bond issued 7 years ago with a face value of $1000.00 with a coupon of 8%. There were 95,000 bonds issued. The company's corporate tax rate is 32%. The Dunkie company has issued both preferred and common stock. The preferred stock pays $3.35 per share and is selling for $97.00. There are 100,000 shares of preferred stock. The company has a beta of .95. You've calculated the return of the market to be 9.5% and the market risk premium is 5.75%. The Dunkie company stock is selling for $15.75 and there are 5,000,000 shares outstanding. What is the weighted average cost of capital for the Dunkie company?

Calculate the weighted average cost of capital for the following Dunkie company (WACC). The Dunkie company's bond is currently selling for 102% of par. The bond is a semi-annual, 20-year bond issued 7 years ago with a face value of $1000.00 with a coupon of 8%. There were 95,000 bonds issued. The company's corporate tax rate is 32%. The Dunkie company has issued both preferred and common stock. The preferred stock pays $3.35 per share and is selling for $97.00. There are 100,000 shares of preferred stock. The company has a beta of .95. You've calculated the return of the market to be 9.5% and the market risk premium is 5.75%. The Dunkie company stock is selling for $15.75 and there are 5,000,000 shares outstanding. What is the weighted average cost of capital for the Dunkie company?

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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ROFL Limited has asked you to calculate the debt component to help in its calculation of its weighted average cost of capital (WACC). ROFL has 7,000 Corporate Bonds outstanding with a face value of $29,000 each. The coupon rate is 3% p.a. compounding semi-annually. The bonds mature in 20 years and currently ROFL bonds are trading in the market at a yield of 6%p.a. If a coupon payment was paid today what is the total market value of ROFL’s issued bonds? Provide your answer to the nearest dollar.
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Madoff Corporation raised money through a bond issue with a total principal value of $3,000,000. Each bond has a face (par) value of $1,000 and coupon rate of 6%. The company's applicable tax rate is 21%. |a) What is the annual coupon payment bond holders expect to receive? b) What is the total after-tax annual interest expense to the company?
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Below is Information regarding the capital structure of Micro Advantage Inc. On the basis of this information you are asked to respond to the following three questions: Required: 1. Micro Advantage issued a $5,400,000 par value, 18-year bond a year ago at 97 (1.e., 97% of par value) with a stated rate of 9%. Today, the bond is selling at 110 (1.e., 110% of par value). If the firm's tax bracket is 35%, what is the current after-tax cost of this debt? 2. Micro Advantage has $5,400,000 preferred stock outstanding that it sold for $24 per share. The preferred stock has a per share par value of $23 and pays a $3 dividend per year. The current market price is $28 per share. The firm's tax bracket is 27%. What is the after-tax cost of the preferred stock? 3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 53,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $150 per share. The expected…
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