Stock in Bear's Big Bonanza has a beta of 1.15. The expected return on the market...

 

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Stock in Bear's Big Bonanza has a beta of 1.15. The expected return on the market is 12 percent; and T-bills are currently yielding 4 percent. Baxter's most recent dividend was $1.80 per share, and dividends are expected to grow at a 4 percent annual rate indefinitely. Baxter's issued a 30-year, 10 percent semiannual coupon bond 8 years ago. The bond currently sells for 109 percent of its face value. If the company's tax rate is 21 percent, then what is Bear's WACC? Assume they have debt with a market value of $20 million, and 2.5 million shares of common stock outstanding. Stock in Bear's Big Bonanza has a beta of 1.15. The expected return on the market is 12 percent; and T-bills are currently yielding 4 percent. Baxter's most recent dividend was $1.80 per share, and dividends are expected to grow at a 4 percent annual rate indefinitely. Baxter's issued a 30-year, 10 percent semiannual coupon bond 8 years ago. The bond currently sells for 109 percent of its face value. If the company's tax rate is 21 percent, then what is Bear's WACC? Assume they have debt with a market value of $20 million, and 2.5 million shares of common stock outstanding.

Answer rating: 100% (QA)

First we need to calculate the cost of equity using the CAPM Ke Rf Rm Rf Ke 004 115012 004 Ke 0112 N... View the full answer