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Diamond Golf is a retail company selling high-end golf clubs. It has 5,000 semiannual bonds outstanding with a coupon rate of 5.5%, a maturity of 20 years, and a par value of $500. The current price of the bonds if $475.00 per bond. Diamond sells the bonds through and investment banker who receives a fee of $4.00 per bond. Diamond has 100,000 shares of common stock outstanding and recently paid shareholders a dividend of $2.00 per share. The company anticipates increasing the dividend by 1% each year. There are no flotation costs for the issuance of common stock. The stock currently trades at $25.00 per share. Diamond's tax rate is 40 percent. What is Diamond Golf's adjusted weighted average cost of capital?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92756587

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