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Company XYZ has a Cost of Equity ( Re ) value of . 1 4 8 1 . They have a Cost of Debt (
Company XYZ has a Cost of Equity Re value of They have a Cost of Debt Rd value of They have billion dollars in debt, billion in equity, and billion total debtequity The beta of Company XYZ is the risk free rate is and MRP is They are subject to a tax rate of
a What is the WACC of Company XYZ
bNext, assume Company XYZ decides to buy a tech company in Europe. The purchase will cost XYZ $ million dollars at t In return, next year the new assets will generate FCF of $ million, growing at per year forever. In terms of required returns on the new investment, comapred to the US assets of XYZ from the first section, will the new European tech aquisition have an extra risk premium of OR
cShould XYZ approve the European technology company purchase? Why or why not?
d What is the highest initial cost at which you would recommend XYZ purchase the tech company?
e At the original cost of $ million dollars to acquire the tech company, what is the highest discount rate for which you would recommend XYZ to purchase the tech company?
All questions must be based on numbers and math. Please explain your reasoning.
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