Hi, I was just wondering if you could check the current working out for questions 1 and 2. It has been previously
stated that the value of debt was only long-term + short-term debt as well. The market value of equity was calculated by $114.33 (current share price) x shares outstanding. The text in red is a guide given to us.
- With the help of the Excel spread sheet provided, compute the market debt to equity (D/E) ratio for BOX. Then use it to find the current cost of equity (rE) and the pretax- WACC for BOX. Assuming the cost of unlevered equity (rU) is 12%.
- At present Liam is considering the following share repurchase proposal from the firm's CFO: the company could raise $12 billion new debt (on permanent basis) at a competitive rate of 3.25% to repurchase shares. Compute the new market D/E ratio, rE, and the weighted average cost of capital of BOX in this scenario.
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