Reference no: EM132997771
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)?
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