Author Question: Bruner Breakfast Foods balance sheet shows a total of $30 million long-term debt with a coupon rate ... (Read 35 times)

allihubbard · **on:** Aug 7, 2023

Bruner Breakfast Foods’ balance sheet shows a total of $30 million long-term debt with a coupon rate of 9%. The yield to maturity on this debt is 11%, and the debt has a total current market value of $25 million. The balance sheet also shows that that the company has 10 million shares of stock, and the total of common equity (common stock plus retained earnings) is $40 million. The current stock price is $5 per share, and shareholders’ required rate of return, r_s, is 13%. The company recently decided that its target capital structure should have 50% debt, with the balance being common equity. The tax rate is 35%. Calculate WACCs based on target, book, and market value capital structures, and then find the sum of these three WACCs.

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30.04%

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31.62%

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31.95%

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32.40%

reason44 · **Reply #1 on:** Aug 7, 2023

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