4. Tiffany is seeking to make a $6 billion acquisition of a related jewelry company. They will fund this acquisition by issuing $5 billion of new debt and $1 billion of new equity. Please answer the following three questions. [You can try the bonus if you have time! (a) Estimate the interest rate they will be charged on this new debt. 14 points] (b) How many new shares will they need to issue? [2 points 4. Tiffany is seeking to make a $6 billion acquisition of a related jewelry company. They will fund this acquisition by issuing $5 billion of new debt and $1 billion of new equity. Please answer the following three questions. [You can try the bonus if you have time!] (a) Estimate the interest rate they will be charged on this new debt. [4 points) (b) How many new shares will they need to issue? [2 points] Balance Sheet on January 31 (S millions) Inventory Acc Rec Other Cash Current Assets 2018 2,254 231 207 1,291 3,983 2019 2,428 245 231 855 3,760 2020 2,464 Inventory 240 Acc Rec 274 Other 897 Cash 3,876 Current Assets NPPE Other F.A. Total F.A. Total Assets 991 494 1,485 5,468 1,027 547 1.574 5,333 2,202 NPPE 583 Other F.A. 2.785 Total F.A. 6.660 Total Assets S.T. Debt Aces Payable Other Total C.L. 121 202 403 725 113 217 388 718 351 S.T. Debt 261 Accs Payable 358 Other 970 Total C.L. L.T. Debt Other Total L.T. Common Eq Total L&E 883 612 1,495 3,248 5,468 883 601 1,484 3,131 5,333 884 L.T. Debt 1.470 Other 2,354 Total L.T. 3,335 Common Eq 6.660 Total L&E Income Statement for Year Ending January 31 (5 millions) 2018 2019 2020 Revenues 4,170 4,442 4,424 Revenues Cost of sales 1,565 1,631 1,662 Cost of sales Gross profit 2,605 2,811 2,762 Gross profit SG&A 1,810 2,021 2,029 SG&A EBIT 795 790 733 EBIT Interest 42 40 39 Interest Other income 8 - 7 -4 Other income Taxable income 744 690 Taxable income Taxes 157 149 Taxes Net Income 370 586 541 Net Income 761 390 Shares o/s(million) 125 122 121 95.04 229 101.04 207 133.59 260 Year end Share Price Depreciation Additional Information Beta shares XCO Debt rating 0.95 T-Bill rate 10-Year T-Bond A B 0.75% 2.20% 3.24% 3.40% 3.75% 4.25% 5.20% 6.50% 9.27%