Free Cash Flow to Firm what is answer using steps Putting Together the FCFF Model Sales for the year that just ended: $48.9 billion Sales growth for next five years: 4 percent Sales growth after Year 5: 3.75 percent Operating margins = 33 percent Tax rate = 22 percent Net margins = 24 percent Debt = $25 billion Pre-tax cost of debt = 4:54 percent Number of shares outstanding = 5 billion Book value of equity: $61.05 billion Book value of assets: $86.05 ROA (calculated as NOPAT1/Equity0): 15.21 percent Percentage of NOPAT that must be reinvested (calculated as growth rate/ROA): Reinvestment rate Years 1 5: 26.29 percent Reinvestment rate after Year 5: 24.65 percent Market value of equity: $150 billion Market value of debt: $25 billion Cost of Equity = 9:5 percent WACC = (6/7)(9:5%) + (1/7)(4.54% )(1 .22) = 8.65%