Southwest Airlines Recent stock price $ 20.69 P/E ratio 49.3 Dividend yield 0.10% Beta 1.1 Financial statement forecast 2001 2002E 2003E 2005E/2007E Total debt ($ mill) 1841.8 Revenue ($mall) 5555.2 6000 7100 Operating margin 17.10% 18.00% 24.50% Tax rate 31.00% 38.50% 38.50% 10,300.00 27.00% 38.50% Common shares outstanding (mill) 776.8 785 795 815 The market risk premium is 5% The short-term risk free rate is 2% The long-term risk free rate is 5% NOPAT = EBIT(1-t) Assume the marginal tax rate going forward at the time of the case is 38.5%. Moody's rating Amount Maturity date outstanding Yield to maturity Issue Short-term bank debt NA $475 million NA NA Floating rate secured notes $200 million 2004 NA Private notes 5.10-6.10 NA $614 million 2006 NA Floating rate French Bank debt NA $52 million 2012 NA 8.75 Note Baal $100 million Oct-03 5.65% 8.00 Note Baal $100 million Feb-05 5.91% 7.875 Debenture Baal $100 million Sep-07 7.41% 7.375 Debenture Baal $100 million Feb-27 8.68% Capital leases NA $109 million NA NA There is not enough information in the case to estimate JetBlue's WACC directly. The above finances contain information on a close competitor in the industry, Southwest Airlines. Use information from the case to estimate Southwest Airline's WACC. What is your best guess for the value of Southwest's debt? (in millions) 6,000 5,555 16,072 1,842