Question

1) Bonaime, Inc., has 7.9 million shares of common stock
outstanding. The current share price is $62.90, and the book value
per share is $5.90. The company also has two bond issues
outstanding. The first bond issue has a face value of $71.9
million, a coupon rate of 7.4 percent, and sells for 88.5 percent
of par. The second issue has a face value of $36.9 million, a
coupon rate of 8.4 percent, and sells for 87.5 percent of par. The
first issue matures in 18 years, the second in 10 years. The most
recent dividend was $3.80 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 40 percent.

What is the company’s WACC?

Answer #1

Bonaime, Inc., has 7.8 million shares of common stock
outstanding. The current share price is $62.80, and the book value
per share is $5.80. The company also has two bond issues
outstanding. The first bond issue has a face value of $71.8
million, a coupon rate of 7.3 percent, and sells for 89 percent of
par. The second issue has a face value of $36.8 million, a coupon
rate of 8.3 percent, and sells for 88 percent of par. The...

Bonaime,
Inc., has 6.2 million shares of common stock outstanding. The
current share price is $61.20, and the book value per share is
$4.20. The company also has two bond issues outstanding. The first
bond issue has a face value of $70.2 million, a coupon rate of 7.2
percent, and sells for 97 percent of par. The second issue has a
face value of $35.2 million, a coupon rate of 6.7 percent, and
sells for 96 percent of par. The...

Bonaime, Inc., has 6.9 million shares of common stock
outstanding. The current share price is $61.90, and the book value
per share is $4.90. The company also has two bond issues
outstanding. The first bond issue has a face value of $70.9
million, a coupon rate of 7.4 percent, and sells for 93.5 percent
of par. The second issue has a face value of $35.9 million, a
coupon rate of 7.4 percent, and sells for 92.5 percent of par. The...

Bonaime, Inc., has 6.7 million shares of common stock
outstanding. The current share price is $61.70, and the book value
per share is $4.70. The company also has two bond issues
outstanding. The first bond issue has a face value of $70.7
million, a coupon rate of 7.2 percent, and sells for 94.5 percent
of par. The second issue has a face value of $35.7 million, a
coupon rate of 7.2 percent, and sells for 93.5 percent of par. The...

Masterson, Inc., has 4 million shares of common stock
outstanding. The current share price is $76, and the book value per
share is $7. The company also has two bond issues outstanding. The
first bond issue has a face value of $105 million, has a coupon
rate of 5 percent, and sells for 95 percent of par. The second
issue has a face value of $90 million, has a coupon rate of 4
percent, and sells for 107 percent of...

Dinklage Corp. has 5 million shares of common stock outstanding.
The current share price is $77, and the book value per share is $8.
The company also has two bond issues outstanding. The first bond
issue has a face value of $110 million, a coupon rate of 6 percent,
and sells for 94 percent of par. The second issue has a face value
of $95 million, a coupon rate of 5 percent, and sells for 106
percent of par. The...

Dinklage Corp. has 6 million shares of common stock outstanding.
The current share price is $66, and the book value per share is $5.
The company also has two bond issues outstanding. The first bond
issue has a face value of $55 million, a coupon rate of 6 percent,
and sells for 91 percent of par. The second issue has a face value
of $40 million, a coupon rate of 5 percent, and sells for 103
percent of par. The...

Dinklage Corp. has 7 million shares of common stock outstanding.
The current share price is $73, and the book value per share is $8.
The company also has two bond issues outstanding. The first bond
issue has a face value of $90 million, a coupon rate of 6 percent,
and sells for 98 percent of par. The second issue has a face value
of $75 million, a coupon rate of 5 percent, and sells for 110
percent of par. The...

Masterson, Inc., has 7 million shares of common stock
outstanding. The current share price is $73, and the book value per
share is $8. The company also has two bond issues outstanding. The
first bond issue has a face value of $90 million, has a coupon rate
of 6 percent, and sells for 98 percent of par. The second issue has
a face value of $75 million, has a coupon rate of 5 percent, and
sells for 110 percent of...

Dinklage Corp. has 7 million shares of common stock outstanding.
The current share price is $86, and the book value per share is $5.
The company also has two bond issues outstanding. The first bond
issue has a face value of $70 million, has a 9 percent coupon, and
sells for 96 percent of par. The second issue has a face value of
$45 million, has a 10 percent coupon, and sells for 104 percent of
par. The first issue...

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