Background: Qantas (ASX: QAN) is currently working on a 10year upgrade plan with Airbus. The plan is trying to retire 5 existing Airbus A320 and purchase 10 new Airbus A321 in 2023. The new planes purchase price is $114.9 million AUD (per-plane price), and the old planes were purchased at $66.65 million AUD (per-plane price) 15 years ago. Both old and new planes can be used for 20 years. QAN is conducting a diminishing value depreciation with a rate of 7.5%. If you are disposing the old planes now, the salvage value will be $5 million AUD. The management team believes that at the end of the first year of the project they could earn pre-tax revenues of $150 million, $250 million the following year, $350 million in the third year, $250 million from the fourth to the ninth year, and $150 million for the last year. The average corporate tax rate paid by QAN is 26.5%.

Cost of Equity and Cost of Debt: Use Capital Asset Pricing Model to compute the required rate of return for QANs equity and use QANs financial information to compute the required rate of return for QANs debt. ASX stock market expected returns can be calculated using the provided data.