Very confused on this whole concept. Would really appreciate numbered steps! Thanks a lot!!!!
Ten Pins Manufacturing has 8.9 million shares of common stock
outstanding. The current share price is $59, and the book value per
share is $4. The company also has two bond issues outstanding. The
first bond issue has a face value of $71.2 million and a coupon
rate of 7.6 percent and sells for 107.7 percent of par. The second
issue has a face value of $61.2 million and a coupon rate of 8.1
percent and sells for 110.1 percent of par. The first issue matures
in 8 years, the second in 27 years.
The company’s stock has a beta of 1.2. The risk-free rate is 3.7
percent, and the market risk premium is 7.6 percent. Assume that
the overall cost of debt is the weighted average implied by the two
outstanding debt issues. Both bonds make semiannual payments. The
tax rate is 35 percent. What is the company’s WACC? (Do not
round intermediate calculations. Enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
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