I The Netflip Company, a media-services provider, has 60,000 bonds outstanding that are selling at par...

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I The Netflip Company, a media-services provider, has 60,000 bonds outstanding that are selling at par ($1,000) and have a yield to maturity of 7.5%. Netflip believes it could issue new bonds at the same yield to maturity. The company also has 5 million shares of common stock outstanding. The common stock has a historical beta of 1.50 and sells for $35.00 a share. Netflip recently paid an annual dividend of $2.15 per share (Do). Over the past 15 years, Netflip had an average payout ratio of 20% and an average return on equity of 13%. The return on the market is 10%, the risk-free rate is 3%, and the corporate tax rate is 40%. a. What is Netflip's after-tax weighted average cost of capital? Hint: use an average expected cost of equity based on the CAPM and DCF approaches. I The Netflip Company, a media-services provider, has 60,000 bonds outstanding that are selling at par ($1,000) and have a yield to maturity of 7.5%. Netflip believes it could issue new bonds at the same yield to maturity. The company also has 5 million shares of common stock outstanding. The common stock has a historical beta of 1.50 and sells for $35.00 a share. Netflip recently paid an annual dividend of $2.15 per share (Do). Over the past 15 years, Netflip had an average payout ratio of 20% and an average return on equity of 13%. The return on the market is 10%, the risk-free rate is 3%, and the corporate tax rate is 40%. a. What is Netflip's after-tax weighted average cost of capital? Hint: use an average expected cost of equity based on the CAPM and DCF approaches.

Answer rating: 100% (QA)

To calculate Netflips aftertax weighted average cost of capital WACC we need to determine the cost o... View the full answer