Explore BrainMass

Explore BrainMass

    Calculate WACC for Boonville and Western Transportation Co.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The Boonville and Western Transportation Co. has the following capital structure.

     Stock $50 mil with a P/E of 8
     Bonds $20 million at 8 %

    The company has a tax rate of 35%

    What is the weighted average cost of Capital (WACC)

    If the Boonville and Western Transportation Co had Bonds of $50 million and Stock of $20 million what would the (WACC) be?
    Is this an overstatement?

    © BrainMass Inc. brainmass.com June 3, 2020, 9:27 pm ad1c9bdddf
    https://brainmass.com/business/weighted-average-cost-of-capital/calculate-wacc-boonville-western-transportation-182588

    Solution Preview

    - What is the weighted average cost of Capital (WACC)?
    We need to know the stock's growth rate g and its dividend payout ratio d.
    The dividend paid is then the product of earnings and dividend payot ratio, i.e., D= E*d
    By Dividend Discounted Model, the stock's cost ...

    Solution Summary

    The solution presents all the calculations for the weighted average cost of capital (WACC) plus a response to the question about an overstatement.

    $2.19

    ADVERTISEMENT