Example 1. We have some information from the book-value balance sheet of Mercer Inc as follows...
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Example 1. We have some information from the book-value balance sheet of Mercer Inc as follows $6 million Short term debt (interest rate is 10%) Bonds (coupon rate is 9% and paid semiannually, maturity is 5 years, the current YTM is 10%, par value is $1,000 per bond) Long term debt (interest rate is 9%) Preferred stock (par value = $100 per share) Common stock (par value = $1 per share) Additional paid-in surplus Retained earnings $20 million $5 million $10 million $1.5 million $12 million $7 million The preferred stock currently sells for $25 per share and pays a dividend of 4.5%. The common stock just paid an annual dividend of $2 per share and dividends are expected to grow at a rate of 3% per year indefinitely. The common stock has a beta 1.6. The market return is 15%, the Treasury bill rate is 4%, and the corporate tax rate is 34%. Calculate WACC. Example 1. We have some information from the book-value balance sheet of Mercer Inc as follows $6 million Short term debt (interest rate is 10%) Bonds (coupon rate is 9% and paid semiannually, maturity is 5 years, the current YTM is 10%, par value is $1,000 per bond) Long term debt (interest rate is 9%) Preferred stock (par value = $100 per share) Common stock (par value = $1 per share) Additional paid-in surplus Retained earnings $20 million $5 million $10 million $1.5 million $12 million $7 million The preferred stock currently sells for $25 per share and pays a dividend of 4.5%. The common stock just paid an annual dividend of $2 per share and dividends are expected to grow at a rate of 3% per year indefinitely. The common stock has a beta 1.6. The market return is 15%, the Treasury bill rate is 4%, and the corporate tax rate is 34%. Calculate WACC.
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Answer rating: 100% (QA)
ANS WER The W ACC is calculated as follows Deb t Weight of debt 6 million 2... View the full answer
Related Book For
Cost Management A Strategic Emphasis
ISBN: 978-0077733773
7th edition
Authors: Edward Blocher, David Stout, Paul Juras, Gary Cokins
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