Dinklage Corp. has 6 million shares of common stock outstanding. The current sha
ID: 1175584 • Letter: D
Question
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $85, and the book value per share is $8. The most recent annual dividend, paid this morning, was $5.70 and the dividend growth rate is 4 percent. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon rate of 8%, a yield to maturity of 8.50%, and sells for 95 percent of par. The second issue has a face value of $40 million, a coupon rate of 9%, a yield to maturity of 7.07%, and sells for 108 percent of par. The first issue matures in 23 years, the second in 5 years. The tax rate is 38 percent. Calculate the company’s WACC. Start by calculating the capital structure weights. Do not round intermediate calculations. Enter your answer as a decimal rounded to 4 decimal places, e.g., 0.1617.
Debt to Assets=
Equity to Assets=
Explanation / Answer
debt to assets = 1 - 0.8293 = 0.1707
equity to assets = 0.8293
Amount weight equity 510,000,000.00 0.8293 Bond 1 61,750,000.00 0.1004 Bond2 43,200,000.00 0.0702