Question

Masterson, Inc., has 4.9 million shares of common stock outstanding. The current share price is $92.00, and the book value per share is $12.50. The company also has two bond issues outstanding. The first bond issue has a face value of $86 million, a coupon rate of 5.4 percent, and sells for 97 percent of par. The second issue has a face value of $58 million, a coupon rate of 5.8 percent, and sells for 105.3 percent of par. The first issue matures in 24 years, the second in 10 years. The most recent dividend was $4.43 and the dividend growth rate is 4.9 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 21 percent. |

What is the company’s cost of equity? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.) |

What is the company’s aftertax cost of debt? (Do not
round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.) |

What is the company’s weight of equity? (Do not round
intermediate calculations and round your answer to 4 decimal
places, e.g., 32.1616.) |

What is the company’s weight of debt? (Do not round
intermediate calculations and round your answer to 4 decimal
places, e.g., 32.1616.) |

What is the company’s WACC? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2
decimal places, e.g., 32.16.) |

Answer #1

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
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coupon rate of 7.2 percent, and sells for 93.5 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...

Masterson, Inc., has 9 million shares of common stock
outstanding. The current share price is $81, 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 $130 million, has a coupon
rate of 6 percent, and sells for 92 percent of par. The second
issue has a face value of $115 million, has a coupon rate of 5
percent, and sells for 103 percent of...

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...

Ten Pins Manufacturing has 9 million shares of common stock
outstanding. The current share price is $75, and the book value per
share is $6. The company also has two bond issues outstanding. The
first bond issue has a face value of $85 million and a coupon rate
of 10 percent and sells for 96 percent of par. The second issue has
a face value of $65 million and a coupon rate of 11 percent and
sells for 109 percent...

Ten Pins Manufacturing has 9 million shares of common stock
outstanding. The current share price is $75, and the book value per
share is $6. The company also has two bond issues outstanding. The
first bond issue has a face value of $85 million and a coupon rate
of 10 percent and sells for 96 percent of par. The second issue has
a face value of $65 million and a coupon rate of 11 percent and
sells for 109 percent...

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...

Hero Manufacturing has 8.5 million shares of common stock
outstanding. The current share price is $77 and the book value per
share is $6. The company also has two bond issues outstanding. The
first bond issue has a face value of $70 million, a coupon rate of
6.6 percent and sells for 108.5 percent of par. The second issue
has a face value of $55.3 million, a coupon rate of 7.8 percent and
sells for 112.3 percent of par. The...

Dinklage Corp. has 9 million shares of common stock outstanding.
The current share price is $81, 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 $80 million, a coupon of 10 percent, and
sells for 96 percent of par. The second issue has a face value of
$50 million, a coupon of 11 percent, and sells for 104 percent of
par. The first issue...

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