The table below shows a book balance sheet for the Wishing Well Motel chain. The

Question

The table below shows a book balance sheet for the Wishing Well Motel chain. The companys long-term debt is secured by its real estate assets, but it also uses short-term bank loans as a permanent source of financing. It pays 11% interest on the bank debt and 9% interest on the secured debt. Wishing Well has 10 million shares of stock outstanding, trading at $89 per share. The expected return on Wishing Wells common stock is 22%.

Calculate Wishing Wells WACC. Assume that the book and market values of Wishing Wells debt are the same. The marginal tax rate is 35%. (Do not round intermediate calculations. Round your answer to 1 decimal place.)

The table below shows a book balance sheet for the Wishing Well Motel chain. The companys long-term debt is secured by its real estate assets, but it also uses short-term bank loans as a permanent source of financing. It pays 11% interest on the bank debt and 9% interest on the secured debt. Wishing Well has 10 million shares of stock outstanding, trading at $89 per share. The expected return on Wishing Wells common stock is 22%.

Explanation / Answer

cost of bank loan= $310 X 11%= $3.41

cost of long term debt= $2400 X 9%= $216

here it is mentioned that equity value is 400 and in the description it is different. so with two values it cant be answered

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