Masterson, Inc., has 7 million shares of common stock outstanding. The current share price is $83,...
Fantastic news! We've Found the answer you've been seeking!
Question:
![](https://dsd5zvtm8ll6.cloudfront.net/questions/2024/03/65f4a93b682cf_1710532916663.jpg)
Transcribed Image Text:
Masterson, Inc., has 7 million shares of common stock outstanding. The current share price is $83, 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 $140 million, has a coupon rate of 6 percent, and sells for 94 percent of par. The second issue has a face value of $125 million, has a coupon rate of 5 percent, and sells for 105 percent of par. The first issue matures in 25 years, the second in 8 years. Suppose the most recent dividend was $4.95 and the dividend growth rate is 4.9 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 24 percent. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC % Masterson, Inc., has 7 million shares of common stock outstanding. The current share price is $83, 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 $140 million, has a coupon rate of 6 percent, and sells for 94 percent of par. The second issue has a face value of $125 million, has a coupon rate of 5 percent, and sells for 105 percent of par. The first issue matures in 25 years, the second in 8 years. Suppose the most recent dividend was $4.95 and the dividend growth rate is 4.9 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 24 percent. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %
Expert Answer:
Answer rating: 100% (QA)
To calculate the Weighted Average Cost of Capital WACC we need to consider the weights and costs of each component of the companys capital structure e... View the full answer
Related Book For
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
Posted Date:
Students also viewed these finance questions
-
QUESTION 1 UML Inc. had an EBIT of 75,000, depreciation expense of 8,500, and paid 20,000 in taxes. Its interest costs were $10,000; its long-term borrowing reduced by $4,000; it raised $6,000 in new...
-
Hello. I could really use help answering these questions below for Financial Management Principles that I am struggling with. Any help answering the question so I can understand for future reference...
-
Masterson, Inc., has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $9. The company also has two bond issues outstanding. The first bond...
-
1. The standard price per unit of materials is used in the calculation of which of the following variances? Materials price variance Materials quantity variance a NO NO b NO YES c YES NO d YES YES 2...
-
Bell Entertainment sponsors rock concerts. The company is considering a contract to hire a band at a cost of $84,000 per concert. Required a. What are the total band cost and the cost per person if...
-
Can the SQL DELETE statement be used with the PopularShowsView view? Why or why not?
-
Assume there is a representative investor with constant relative risk aversion . Assume there is a risk-free asset and the market is complete. Use the fact that R p and Rf span the mean-variance...
-
One day, Leslie prepared a new snack to serve at preschool: celery stuffed with ricotta cheese and pineapple. The first time she served it, few children touched it. How can Leslie encourage her...
-
jestion 25 (1 point) A firm gathers data by conducting surveys, interviewing customers, or mailing out questionnaires. OA) A) non-referenced OB) primary C) unbiased D) secondary
-
While many parties were interested in acquiring MCI, the major players included Verizon and Qwest. U.S.-based Qwest is an integrated communications company that provides data, multimedia, and...
-
You are thinking of investing in an annuity that begins in 23 years, with the first payment occurring 23 years and 1 month from today (ordinary annuity--payments at the end of the period). The...
-
Cauchy's sequence theorem
-
QUESTION: 1 Discuss Local Government and Administration of Tanzania
-
Discuss how Central Governments Exercise Control over Local Governments by Citing Examples
-
Find derivative of sin x,cos a,tan x,secx,csca, cot a
-
Find anti derivative of cos x,sin x,sec r,sec r tan r,csc xcotx,csc r
-
Farm Fresh Inc. is introducing No Scent Cow Manure, a real agricultural breakthrough, for a more pleasant fertilizing experience. The new dung can be purchased 100 lb. bags for $20. The complex...
-
7. FALSE DILEMMA 8. GANDWAGON Definition: Fallacy example: How to revise argument: Definition: Fallacy example: How to revise argument:
-
You own $100,000 worth of Smart Money stock. One year from now, you will receive a dividend of $3.15 per share. You will receive a dividend of $3.27 two years from now. You will sell the stock for...
-
This ones a little harder. Suppose the current share price for the firm in the previous problem is $81.15 and all the dividend information remains the same. What required return must investors be...
-
Richard, Inc., will pay a quarterly dividend per share of $.61 at the end of each of the next 12 quarters. Thereafter, the dividend will grow at a quarterly rate of 1.1 percent forever. The...
-
Commercial eggs produced from different housing systems. In the production of commercial eggs, four different types of housing systems for the chickens are used: cage, barn, free range, and organic....
-
What is the difference between a design study and an observational study?
-
Accounting and Machiavellianism. A study of Machiavellian traits in accountants was published in Behavioral Research in Accounting (Jan. 2008). Machiavellian describes negative character traits such...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App