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Finance - The Rondo Company Case Analysis

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A. Prepare a valuation of Rondo's securities using the methods demonstrated. You should value the existing mortgage bond, the required rate of returns on equity securities using the CAPM model and the theoretical common stock price using the Gordon Dividend Constant Growth Stock Model.

B. Prepare a schedule preparing Rondo's Weighted Average Cost of Capital as of the last balance sheet date and the Marginal Weighted Average Cost of Capital. Please write a one page summary analyzing and comparing your WACC and MWACC calculations.

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Requirement A and B
Capital Structure Value Weights Cost of Capital Income Tax After- tax Cost of Capital Weighted Average Cost of Capital
Bank loan 7,500,000 17.26% 6.00% 40% 3.60% 0.62%
Mortgage bond 5,000,000 11.50% 9.00% 40% 5.40% 0.62%
Common stock 30,960,000 ...

Solution Summary

A Rondo Company case analysis is determined. The valuation is examined.

$2.19