2).Boeing Company stick price=212.67 ordinary shares =582320 Long term debit and capital=61890000 current debit capital =1961000 Cash=7752000 short term debit=1961000 current portion of ling term debit = coupon=8750 price=99.518 yield=50.224 Current Asset=121642000 Cash equivalent =25590000

market value of equity = share price*share stand Marke value of equity= 123841994.4

D/E Ratio = long term debit+short term debit / current portion of the debit - cash equivalent

D/E Ratio =61890000+1961000-25590000/123841994.4

D/E Ratio =0.30895012783

3). rE=rU+D/E(rU - rD) rE=0.12+0.30895012783(0.12-50.224) rE=-15.35963717824

4. Compute the current weighted average cost of capital (WACC) for Boeing using Eq. (2) given their current debt-to-equity ratio

Formula rwacc=rA=rU=E/(E+D) re+D/(E+D) rd Eq(2)

5. Repeat Steps 3 and 4 for the two scenarios you would like to analyze, issuing $1 Billion in debt to repurchase stock, and issuing $1 Billion in stock to repurchase debt. (Although you realize that the cost of debt capital rD may change with changes in leverage, for these modestly small changes you decide to assume that rD remains constant. What is the market D/E ratio in each of these cases?

6. Prepare a written explanation for your boss explaining the relationship between capital structure and the cost of capital in this exercise.