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some information the risk free rate is 1.902 Market Cap (the market value of equity) 254.89 Billion; Enterprise Value (market-value equity + net debt) 319.73

some information

  1. the risk free rate is 1.902
  2. Market Cap (the market value of equity) 254.89 Billion; Enterprise Value (market-value equity + net debt) 319.73 Billion; Total Cash 10.11 billion ; Total Cash Per Share 5.62 ; Total Debt 56.96 billion; Beta 0.7
  3. pre tex cost of debt 3.522%

questions:

  1. Compute the weights for equity and debt based on the market value of equity and market value of debt
  2. Calculate the company's cost of equity capital using the CAPM, the risk-free rate you collected, and a market risk premium of 5%.
  3. Assume that the company has a tax rate of 35%, calculate the effective (after-tax) cost of debt capital.
  4. Calculate the company's WACC using the market value of equity and debt.
  5. Calculate the company's net debt by subtracting its cash from its debt. Recalculate the weights for the WACC using the market value of equity, net debt, and enterprise value (note: enterprise value is the total market value of a firm's equity and debt, less the value of its cash and marketable securities). Recalculate the company's WACC using the weights based on the net debt. How much does it change?
  6. How confident are you of your estimates in steps 4 and 5?Which implicit assumptions did you make during your data collection efforts?

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