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S debt ratio of 40 means that their capital structure

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Unformatted text preview: r! ) of 13% and 8%, respectively, allow us to determine post- tax weighted average cost of capital as follow: After- tax WACC = 1 − T D E × r! + × r! E+D E+D = 1 − 35% 40% × 8% + 60% × 13% = 9.88% (b) Mahalo is a Hawaiian word meaning thanks, gratitude, admiration, praise, esteem, regards, or respects.[2] (NB – Aloha in the Hawaiian language originally means affection, peace, compassion and mercy. [3]) Answers to Q3: M ethod: <i> i dentify market value of equity (market capitalisation) and market value of debt <ii> determine capital structure by identifying debt portion and equity portio n <iii> identify c ost of equity using CAPM equation <iv> calculate weighted average cost of capital <i> : Market value of equity (or market capitalsiation) = # of outstanding shares × price per share = 256.2 million shares × $59 per share = $15,115.8 millions As for market value of debt, according to the assumption given by the question (market value of debt to be par value), we can simply identify this by totaling this to the book value of long- term debt of $6,268 millions. 2 Wikipedia, “Mahalo (word),” http://en.wikipedia.org/wiki/Mahalo_(word) 3 Wikiped...
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This note was uploaded on 01/14/2013 for the course ALUMNI A000 taught by Professor N during the Spring '12 term at Uni. Nottingham.

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