Q2 Using your answer in Q1, compute the levered cost of equity for the capital structures listed below: Risk-free rate 1.8% tax rate 39% Market return 8.7% debt weight wD 5% 25% 40% equity weight wE 95% 75% 60% SHOW WORK HERE, HIGHLIGHT FINAL ANSWER IN YELLOW 60% 40% Q3 Using your answer in Q2, a Compute the WACC for the capital structures listed below. b Compute the Value of Operations for the capital structures listed below. c Which debt option minimizes the WACC? Maximizes the Value of Operations? d Is this the best possible capital structure for WWWW Inc.? Why or why not? Risk-free rate Market return 1.8% 8.7% tax rate FCFF 39% 192 million, forever debt weight wD 5% 25% 45% 60% equity weight WE 95% 75% 55% 40% cost of debt 6.7% 6.9% 7.3% 8.5% The various cost of debt values were estimated based on an analysis of comparable companies. SHOW WORK HERE, HIGHLIGHT FINAL ANSWER IN YELLOW Q1 Compute the unlevered beta for Walter White's Weekend Wear (WWWW) Inc. The firm's capital structure contains debt and equity only. debt-to-capital ratio 18% tax rate 39% levered beta 1.2 SHOW WORK HERE, HIGHLIGHT FINAL ANSWER IN YELLOW Q2 Using your answer in Q1, compute the levered cost of equity for the capital structures listed below: Risk-free rate 1.8% tax rate 39% Market return 8.7% debt weight wD 5% 25% 40% equity weight wE 95% 75% 60% SHOW WORK HERE, HIGHLIGHT FINAL ANSWER IN YELLOW 60% 40% Q3 Using your answer in Q2, a Compute the WACC for the capital structures listed below. b Compute the Value of Operations for the capital structures listed below. c Which debt option minimizes the WACC? Maximizes the Value of Operations? d Is this the best possible capital structure for WWWW Inc.? Why or why not? Risk-free rate Market return 1.8% 8.7% tax rate FCFF 39% 192 million, forever debt weight wD 5% 25% 45% 60% equity weight WE 95% 75% 55% 40% cost of debt 6.7% 6.9% 7.3% 8.5% The various cost of debt values were estimated based on an analysis of comparable companies. SHOW WORK HERE, HIGHLIGHT FINAL ANSWER IN YELLOW Q1 Compute the unlevered beta for Walter White's Weekend Wear (WWWW) Inc. The firm's capital structure contains debt and equity only. debt-to-capital ratio 18% tax rate 39% levered beta 1.2 SHOW WORK HERE, HIGHLIGHT FINAL ANSWER IN YELLOW