Multiple Choice
Bolster Foods' (BF) balance sheet shows a total of $25 million long-term debt with a coupon rate of 8.50%.The yield to maturity on this debt is 8.00%,and the debt has a total current market value of $27 million.The balance sheet also shows that the company has 10 million shares of stock,and the stock has a book value per share of $5.00.The current stock price is $20.00 per share,and stockholders' required rate of return,rs,is 12.00%.The company recently decided that its target capital structure should have 35% debt,with the balance being common equity.The tax rate is 40%.Calculate WACCs based on book,market,and target capital structures,and then find the sum of these three WACCs.Do not round your intermediate calculations.
A) 27.81%
B) 26.60%
C) 36.27%
D) 24.78%
E) 30.22%
Correct Answer:
Verified
Correct Answer:
Verified
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