Erna Corp. has 4 million shares of common stock outstanding. The current share price is $83, and the book value per share is $8. Erna Corp. 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 $60 million, has a coupon rate of 7 percent, and sells for 106 percent of par. The first issue matures in 21 years, the second in 3 years.
Suppose the most recent dividend was $5.50 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 35 percent. What is the company
| Erna Corp. has 4 million shares of common stock outstanding. The current share price is $83, and the book value per share is $8. Erna Corp. 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 $60 million, has a coupon rate of 7 percent, and sells for 106 percent of par. The first issue matures in 21 years, the second in 3 years. |
| Suppose the most recent dividend was $5.50 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 35 percent. What is the company |
Related questions
| Erna Corp. has 4 million shares of common stock outstanding. The current share price is $83, and the book value per share is $8. Erna Corp. 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 $60 million, has a coupon rate of 7 percent, and sells for 106 percent of par. The first issue matures in 21 years, the second in 3 years. |
| Suppose the most recent dividend was $5.50 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 35 percent. What is the company |
| Erna Corp. has 9 million shares of common stock outstanding. The current share price is $88, and the book value per share is $7. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $80 million, has a coupon rate of 5 percent, and sells for 98 percent of par. The second issue has a face value of $55 million, has a coupon rate of 6 percent, and sells for 106 percent of par. The first issue matures in 20 years, the second in 8 years. |
| Suppose the most recent dividend was $6.00 and the dividend growth rate is 8 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 38 percent. What is the companyâs WACC? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) What is the companyâs WACC % Help! I do not know how to do this problem. Can some one help me. Someone tried to help me with this and calculated 12.82% but it was incorrect. What is the correct answer? |
