In: Finance
Bolster Foods' (BF) balance sheet shows a total of $25 million
long-term debt with a coupon...
Bolster Foods' (BF) balance sheet shows a total of $25 million
long-term debt with a coupon rate of 8.50%. The yield to maturity
on this debt is 8.00%, and the debt has a total current market
value of $27 million. The balance sheet also shows that the company
has 10 million shares of stock, and the stock has a book value per
share of $5.00. The current stock price is $20.00 per share, and
stockholders' required rate of return, rs, is 12.25%.
The company recently decided that its target capital structure
should have 35% debt, with the balance being common equity. The tax
rate is 25%. Calculate WACCs based on book, market, and target
capital structures, and then find the sum of these three WACCs. Do
not round your intermediate calculations.