What assumptions would we have to make

Reference no: EM133715746

Question: According to their 2023 annual report, QAN have (approximately) $5b in long term debt and (approximately) $8b in equity, giving total capital of $13b. Say that the QAN before tax cost of debt is 4.0%, the cost of equity is 11% and that QAN have a tax rate of 30%.

(a) Calculate the weighted average cost of capital (WACC) for QAN.

(b) Say QAN has before tax free cash flow (FCF) per share of $0.50. Given this, calculate the value of QAN shares using the WACC from Part (a).

(c) If we were to use the WACC calculated in Part (a) as the discount rate in capital budgeting, what assumptions would we have to make?

(Include enough working to show you understand the calculations.)

Reference no: EM133715746

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