What debt and equity weights will SpaceX use

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Question - Space X is considering adding a new hub operation on Mars. The finance group at Space X has gathered the following data. They have hired you as a Finance consultant to help them determine their cost of capital.

-Total Enterprise Value is $24 billion

-Current stock sells at $80 per share with 200 million shares outstanding.

-Debt was issued with a 4% coupon, five years ago and is now trading at 98.5.

-Space X is introducing an annual dividend of $1.40 this year, growing at 4% per year.

-The current risk free rate is 2%, Space X's Beta is 2.5, the market premium is 7%.

-Space X pays a corporate tax rate of 25%.

Required -

-What debt and equity weights will SpaceX use to calculate WACC?

-What is SpaceX's cost of debt?

-What is SpaceX's cost of common equity?

-What is SpaceX's WACC?

-Under what circumstances might it make sense for SpaceX to make the investment if it returns less than their cost of capital (WACC)?

Reference no: EM132997771

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