Question

Daniel's Sound Systems has 210,000 shares of common stock outstanding at a market price of $36...

Daniel's Sound Systems has 210,000 shares of common stock outstanding at a market price of $36 a share. Last month, Daniel's paid an annual dividend in the amount of $1.593 per share. The dividend growth rate is 4%. Daniel's also has 6,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 7% coupon, pay interest annually, and mature in 4.89 years. The bonds are selling at 99% of face value. The company's tax rate is 34%. What is Daniel's weighted average cost of capital?

Hint: to find the bonds' YTM use N = 4.89

A. 5.3%

B. 5.8%

C. 6.3%

D.6.9%

E. 7.2%

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Sound Systems (SS) has 200 shares of common stock outstanding at a market price of $37...
Sound Systems (SS) has 200 shares of common stock outstanding at a market price of $37 a share. SS recently paid an annual dividend in the amount of $1.20 per share. The dividend growth rate is 4 percent. SS also has 5 bonds outstanding with a face value of $1,000 per bond that are selling at 99 percent of par. The bonds have a 6 percent coupon and a 6.7 percent yield to maturity. If the tax rate is 21...
United, Inc. has 320,000 shares of common stock outstanding at a market price of $52 a...
United, Inc. has 320,000 shares of common stock outstanding at a market price of $52 a share. Last month, United paid an annual dividend in the amount of $1.50 per share. The dividend growth rate is 6%. United also has 10,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 5% coupon, pay interest annually, and mature in 10 years. The bonds are selling at 102% of face value. The company's tax rate is 25%....
Nature Valley has 400,000 shares of common stock outstanding at a market price of $28 a...
Nature Valley has 400,000 shares of common stock outstanding at a market price of $28 a share. Last month, Nature Valley paid an annual dividend in the amount of $1.00 per share. The dividend growth rate is 6%. Nature Valley also has 20,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 6% coupon, pay interest annually, and mature in 10 years. The bonds are sold at par. The company's tax rate is 25%. What...
R.S. Green has 250,000 shares of common stock outstanding at a market price of $28 a...
R.S. Green has 250,000 shares of common stock outstanding at a market price of $28 a share. Next year's annual dividend is expected to be $1.55 a share. The dividend growth rate is 2 percent. The firm also has 7,500 bonds outstanding with a face value of $1,000 per bond. The yield to maturity that bonds of this category generally earn is 9.5%. The company's tax rate is 34 percent. What is the firm's weighted average cost of capital?
City Rentals has 44,000 shares of common stock outstanding at a market price of $32 a...
City Rentals has 44,000 shares of common stock outstanding at a market price of $32 a share. The common stock just paid a $1.50 annual dividend and has a dividend growth rate of 2.5 percent. There are 7,500 shares of $9 preferred stock outstanding at a market price of $72 a share. The outstanding bonds mature in 11 years, have a total face value of $825,000, a face value per bond of $1,000, and a market price of $989 each,...
Dinklage Corp. has 7 million shares of common stock outstanding. The current share price is $86,...
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...
Bonaime, Inc., has 6.2 million shares of common stock outstanding. The current share price is $61.20,...
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...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $78,...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $78, and the book value per share is $9. The company also has two bond issues outstanding. The first bond issue has a face value of $115 million, a coupon rate of 7 percent, and sells for 93 percent of par. The second issue has a face value of $100 million, a coupon rate of 6 percent, and sells for 105 percent of par. The...
There are 2 million common shares of stock outstanding, currently trading for $35 per share. The...
There are 2 million common shares of stock outstanding, currently trading for $35 per share. The most recent dividend paid was $4 per share. Dividends are expected to increase by 2% per year for the foreseeable future. There are 25,000 bonds outstanding with a coupon rate of 5% that mature in eight years. The face value of these bonds is $1000, coupon payments are made annually, and the yield to maturity is 4%. There are 75,000 bonds outstanding with a...
Kim's Bridal Shoppe has 11,400 shares of common stock outstanding at a price of $48 per...
Kim's Bridal Shoppe has 11,400 shares of common stock outstanding at a price of $48 per share. It also has 275 shares of preferred stock outstanding at a price of $90 per share. There are 300 bonds outstanding that have a coupon rate of 6.7 percent paid semiannually. The bonds mature in 29 years, have a face value of $2,000, and sell at 108 percent of par. What is the capital structure weight of the common stock?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT