Ferraris IPO and WACC. Ferrari, the famous high-performance automotive group, launched its initial public offering (IPO) on October 20, 2015. Although the share price had initially risen to over 57 euros () per share, by the end of the year it had settled to 48 euros (). Ferrari had been owned by Fiat (Italy), and had never calculated its own cost of capital before, one independent of Fiat. It now needed to, and one of its first challenges was estimating its beta. With only two months of trading to base it on, the corporate treasury group had started with what were considered comparable firms, which, for Ferrari, meant firms in the luxury goods industry, not automotive. Luxury goods were historically less volatile than the market, so the initial guess on Ferraris beta was 0.90. Using the following assumptions, answer the questions.

Component	Value
Italian risk-free cost of debt in euros ()	4.00%
Ferraris cost of debt in euros ()	3.99%
Italian corporate income tax rate	33.50%
Ferraris prospective beta	0.90
Italian equity market risk premium (equity return over risk-free)	5.50%
Ferraris shares outstanding	189,000,000
Ferraris share price in euros	48.00
Ferraris debt outstanding in euros	510,000,000

1. What is Ferraris cost of debt, after-tax, in euros?

2. What is Ferraris cost of equity in euros?

3. What is Ferraris market capitalization?

4. What is Ferraris total value of equity outstanding?

5. What proportion of Ferraris capital structure is equity?

6. What proportion of Ferraris capital structure is debt?

7. What is Ferraris weighted average cost of capital?

8. What is Ferraris WACC if its beta was higher, like other automotive companies, say, 1.20?