Calculating Book Value Of Stock
2011
Calculate WACCs based on target, book, & market value capital structures, then find the sum of these 3 WACC’s?
‘Bruner Breakfast Foods’ (BBF) balance sheet shows a total of $20 million longterm debt with a coupon rate of 8.00%. The yield to maturity on this debt is 10.00%, and the debt has a total current market value of $18 million. The balance sheet also shows that that the company has 10 million shares of stock, and total of common equity (common stock plus retained earnings) is $30 million. The current stock price is $4.50 per share, and stockholders’ required rate of return, rs, is 12.25%. The company recently decided that its target capital structure should have 50% debt, with the balance being common equity. The tax rate is 40%. Calculate WACCs based on target, book, and market value capital structures, and then find the sum of these three WACCs.
The Choices are:
a. 27.04%
b. 28.17%
c. 29.34%
d. 30.51%
e. 31.73%
Can someone show me how to solve this?
e
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