Consider Company A that has $$150$ billion dollars in total shareholder equity and $$70$ billion dollars

in total long term debt. Further suppose, that the cost of equity is $20\%$ per year and the cost of debt

is $6\%$ per year. Assume the firm pays no taxes.

$($a$)$ Calculate the WACC for Company A$.$

$($b$)$ Suppose the company has decided to issue corporate bonds, which has increased its debt from

$70$ billion to $$100$ billion dollars. Calculate the return on equity $r_E$ for the additional debt, then

calculate the WACC.

$($c$)$ Compare part a$.)$ and b$.),$ what do you notice about the WACC in either case and why?

$($d$)$ Consider the free cash flows for Company A below:

Calculate the Enterprise Value assuming the growth rate in cash flows $()$ is $12\mathrm{.}3\%.$ What is the

share price of the firm if it has $2$ billion shares outstanding. Assume $2024$ is the first year, where

$t=1.$