Vedder, Inc., has 6.4 million shares of common stock outstanding. The current share price is $61.40, and the book value per share is $4.40. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.4 million, a coupon rate of 7.4 percent, and sells for 96 percent of par. The second issue has a face value of $35.4 million, a coupon rate of 6.9 percent, and sells for 95 percent of par. The first issue matures in 18 years, the second in 10 years. The most recent dividend was $3.05 and the dividend growth rate is 5 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 40 percent.
Required: What is the companyâs cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Cost of equity %
What is the companyâs aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Aftertax cost of debt %
What is the companyâs equity weight? (Do not round intermediate calculations. Enter your answer rounded to 4 decimal places (e.g., .1632).)
Equity weight
What is the companyâs weight of debt? (Do not round intermediate calculations. Enter you answer rounded to 4 decimal places (e.g., .1632).)
Debt weight
What is the companyâs WACC? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
WACC %
| Vedder, Inc., has 6.4 million shares of common stock outstanding. The current share price is $61.40, and the book value per share is $4.40. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.4 million, a coupon rate of 7.4 percent, and sells for 96 percent of par. The second issue has a face value of $35.4 million, a coupon rate of 6.9 percent, and sells for 95 percent of par. The first issue matures in 18 years, the second in 10 years. The most recent dividend was $3.05 and the dividend growth rate is 5 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 40 percent. |
| Required: |
| What is the companyâs cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Cost of equity | % |
| What is the companyâs aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Aftertax cost of debt | % |
| What is the companyâs equity weight? (Do not round intermediate calculations. Enter your answer rounded to 4 decimal places (e.g., .1632).) |
| Equity weight |
| What is the companyâs weight of debt? (Do not round intermediate calculations. Enter you answer rounded to 4 decimal places (e.g., .1632).) |
| Debt weight |
| What is the companyâs WACC? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| WACC | % |
Related questions
| Vedder, Inc., has 6.2 million shares of common stock outstanding. The current share price is $61.20, and the book value per share is $4.20. Vedder also has two bond issues outstanding. The first bond issue has a face value of $70.2 million, a coupon rate of 7.2 percent, and sells for 97 percent of par. The second issue has a face value of $35.2 million, a coupon rate of 6.7 percent, and sells for 96 percent of par. The first issue matures in 22 years, the second in 14 years. |
| Required: | |
| (a) | What are the company |
