In Problem 11, suppose the most recent was $3.95 and the growth rate is 5 percent. Assume that the overall is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 21 percent. What is the company’s WACC?
Problem 11
Masterson, Inc., has 4.1 million shares of outstanding. The current share price is $84, and the book value per share is $11. The company also has two bond issues outstanding. The first bond issue has a of $70 million, has a rate of 5.1 percent, and sells for 98 percent of par. The second issue has a of $50 million, has a rate of 5.60 percent, and sells for 108 percent of par. The first issue matures in 20 years, the second in 12 years.
