Johnny Cake Ltd. has 8 million shares of stock outstanding selling at $22 per share an an issue fo $40 million in 10 percent annual coupon bonds with a maturity of 17 years, selling at 94 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? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
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 =
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