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Qinetiq is considering building a new factory. To evaluate the new factory project, Qinetiq needs to estimate its cost of capital. Review the following information
Qinetiq is considering building a new factory. To evaluate the new factory project, Qinetiq needs to estimate its cost of capital. Review the following information and answer the questions that follow to help Qinetiq with its analysis. Debt Number of bonds outstanding = Face value = Maturity = Coupons = Market price = Tax rate = 250,000 $1,000 2 years 7% paid annually $1,027.96 30% Equity Market price = Shares outstanding = Beta = Risk-free rate = Expected return on market = $46 5 million 1.13 3% 7% a. What is the after-tax cost of debt for Qinetiq bonds? b. According to the CAPM, what is the required return of Qinetiq shareholders? c. What is the weighted average cost of capital (WACC) for Qinetiq? a. What is the after-tax cost of debt for Qinetig bonds? 1% (Round to two decimal places.) b. According to the CAPM, what is the required return of Qinetiq shareholders? % (Round to two decimal places.) c. What is the weighted average cost of capital (WACC) for Qinetiq? % (Round to two decimal places.)
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