The Flying Dove has 1,200 bond.
The Flying Dove has 1,200 bonds outstanding with a $1,000 par value, a 7% coupon, 12 years to
maturity, semiannual interest payments, and a market price equal to 102% of par. The firm also has
47,000 shares of common stock outstanding at a price per share of $33. The Flying Dove has an
expected dividend growth rate of 3% and recently paid a dividend of $2.15 per share. The firm’s tax rate
is 34%. What is the firm’s WACC? What is the firm’s debt-to-equity ratio?
Answer WACC = 0.0739 = 7.39%
Answer D/E = 0.7892
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