Question

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 par. The first issue matures in 25 years, the second in 8 years. |

Suppose the most recent dividend was $4.60 and the dividend growth rate is 5.1 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 22 percent. What is the company’s WACC? |

Answer #1

Dinklage Corp. 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, a coupon rate of 5 percent,
and sells for 95 percent of par. The second issue has a face value
of $90 million, a coupon rate of 4 percent, and sells for 107
percent of par. The...

Masterson, Inc., has 9
million shares of common stock outstanding. The current share price
is $69, 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 $70 million, has a coupon rate of 6 percent, and sells for 94
percent of par. The second issue has a face value of $55 million,
has a coupon rate of 5 percent, and sells for 106 percent of...

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 5 million shares of common stock
outstanding. The current share price is $65, 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 $50 million, has a coupon rate
of 5 percent, and sells for 90 percent of par. The second issue has
a face value of $35 million, has a coupon rate of 4 percent, and
sells for 102 percent of...

Dinklage Corp. has 5 million shares of common stock outstanding.
The current share price is $84, 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 $60 million, has a 7 percent coupon, and
sells for 94 percent of par. The second issue has a face value of
$35 million, has a 8 percent coupon, and sells for 107 percent of
par. The first issue...

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...

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....

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...

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 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...

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