Company Beta Debt Equity Cash

Pfizer 0.52 $16.4 $98.3 $26.0

Wyeth 0.61 $11.5 $57.2 $14.2

A.Pfizer will pay out $45 billion in cash to Wyeth shareholders (and will also give them some shares in Pfizer, bringing the total deal value to roughly $68 billion). To fund this payout, it will borrow $22.5 billion in the capital markets and use $22.5 billion of its $26 billion in cash. Wyeth will pay off its existing $11.5 billion of debt by using most of its cash. The deal therefore eliminates the excess cash holdings of Pfizer and Wyeth. Assuming the deal creates no synergies, what is the value of the new firm's debt and equity? What is the cost of unlevered equity (Ku) of the new firm? What is the WACC of the new firm?