Question
Electrolux of Sweden.Kristian Thalen has just joined the corporate treasury group at Electrolux of Sweden, a multinational Swedish appliance maker. Electrolux is considering making an
Electrolux of Sweden.Kristian Thalen has just joined the corporate treasury group at Electrolux of Sweden, a multinational Swedish appliance maker. Electrolux is considering making an offer for GE's appliance business, and wants to revise its weighted average cost of capital for its analysis in its home currency, the Swedish kroner (SEK). Kristian has been assigned the task. Using the following assumptions he goes step by step through the following questions.
Component | Value |
|
Swedish kroner government bond yield (10-year) | 4.30% | |
Electrolux credit risk premium | 1.00% | |
Swedish corporate income tax rate | 32% | |
Electrolux beta | 1.33 | |
Swedish equity market risk premium (equity return over risk-free rate) | 4.20% | |
Electrolux shares outstanding | 289,190,000 | |
Electrolux share price | SEK 176.31 | |
Electrolux debt outstanding | SEK 11,700,000,000 |
a. What is Electrolux's cost of debt, after-tax, in SEK?
b. What is Electrolux's cost of equity in SEK?
c. What is Electrolux's market capitalization?
d. What is Electrolux's total value of equity outstanding?
e. What proportion of Electrolux's capital structure is debt?
f. What proportion of Electrolux's capital structure is equity?
g. What is Electrolux's weighted average cost of capital?
Round to 2 decimal places.
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