Comida corp. is a grocery store located in the midwest. It paid an annual divide
ID: 2788506 • Letter: C
Question
Comida corp. is a grocery store located in the midwest. It paid an annual dividend of $3.00 last year to its shareholders and plans to increase the dividend annually at 4.0%. it has 400,000 shares outstanding. The shares currently se for $23 per share. Cor da Corp. has 0,000 se annual bonds outstanding with a coupon rate of 7 5% a ma my of 15 e anda par va e o. The bonds curent , have a ei o maturity (YTM) of 6% per bond. What is the adjusted WACC for Comida Corp. if the corporate tax rate is 25%? What is the adjusted WACC for nida corp f the corporate tax rate is 25% % (Round to two decimal plaExplanation / Answer
market value of equity=400000*23=9200000
cost of equity=((3*1.04)/23)+4%=17.57%
cost of debt before tax=6%
value of the bond
=10000*(((1000*7.5%/2)*(1-(1+(6%/2))^(-15*2))/(6%/2))+(1000/(1+(6%/2))^(15*2)))
=11470033.10
WACC=(9200000/(9200000+11470033.10))*17.57%+(11470033.10/(9200000+11470033.10))*6%*(1-25%)
=10.32%
the above is the answer