The firm expects to maintain capital structure

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Reference no: EM132050250

1. Badger Corp. has an issue of 6% bonds outstanding with 6 months left to maturity. The bonds are currently priced at $988, and pay interest semiannually. The firm's marginal tax rate is 40%. The estimated risk premium between the company's stock and bond returns is 6%. The firm's expects to maintain a capital structure with 40% debt and 60% equity going forward. The company's W.A.C.C. is ____%.

2. Marie Corp. has $1724 in debt outstanding and $2210 in common stock (and no preferred stock). Its marginal tax rate is 40%. Marie's bonds have a YTM of 6.5%. The current stock price (Po) is $47. Next year's dividend is expected to be $2.42, and it is expected to grow at a constant rate of 7% per year forever. The company's W.A.C.C. is ____%.

Reference no: EM132050250

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