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Granby Foods' (GF) balance sheet shows a total of $25 million long-term debt with a coupon...

Granby Foods' (GF) 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 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, r s, 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 40%. Calculate WACCs based on book, market, and target capital structures. What is the sum of these three WACCs?

a.

30.77%
b.

29.54%
c.

28.36%
d.

33.28%
e.

32.00%

Solutions

Expert Solution

Question : What is the sum of the three WACC.

Answer : we got the answer as 33.25% which is near to 33.28% i.e. Option d.

Below is the attached calculation

jeff jeffy answered 2 years ago
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