Question
In: Accounting
A company Star gives you the following data. Compute WACC. STOCK: nominal value 25 USD, market...
A company Star gives you the following data. Compute WACC.
STOCK: nominal value 25 USD, market value 40 USD, dividend at the
beginning of the year 5 USD, growth rate 2%, a company issued
20,000 pieces of stock.
BONDS: nominal value 50 USD, market value 40 USD, interest rate 10%, the company issued 5,000 pieces, number of years to maturity 11. Tax rate 20%.
Solutions
Expert Solution
Cost of debt:
| Calculator | |
| Inputs: | |
| PV | (40.00) |
| PMT | 4 |
| FV | 50 |
| N | 2 |
| Output: | |
| I/Y = effective interest rate | 21.2970% |
| After tax interest rate | 17.038% |
| Type | Capital (market value) | % of total capital | × Required return before tax | WACC |
| Debt | $ 200,000 | 20.00% | 17.038% | 3.41% |
| Preferred | $ - | 0.00% | 0.000% | 0.00% |
| Common | $ 800,000 | 80.00% | 14.7500% | 11.80% |
| =5*1.02/40+2% | ||||
| $ 1,000,000 | 15.21% |
WACC is 15.21%
please rate.
ekkarill92 answered 2 years agoRelated Solutions
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