Johnny Cake Ltd. has 8 million shares of stock outstanding selling at $22 per share and an issue of $40 million in 10 percent annual coupon bonds with a maturity of 17 years, selling at 94.0 percent of par. Assume Johnny Cake's weighted-average tax rate is 34 percent, its next dividend is expected to be $3 per share, and all future dividends are expected to grow at 5 percent per year. indefinitely.
What is its WACC?
Given:
Shares outstanding 8,000,000
Price Per Share $22.0
Face Value of Outstanding Bond Issue $40,000,000
Coupon Rate on bonds 10%
Maturity of bonds 17
Price of Bonds (% of par) 94.0
Weighted Average Tax Rate 34.0%
Next Expected Dividend $3.00
Expected Dividend Growth Rate 5.0%
Complete the following analysis. (Do not hard code values in your calculations.
Answer:
Before Tax Cost of Equity =
Before Tax Cost of Debt=
Equity Weight =
Debt Weight =
WACC =