Question 4 (22 marks) a) A firm has 1,500,000 shares of stock outstanding with a price per share equal to $12. There are

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Question 4 22 Marks A A Firm Has 1 500 000 Shares Of Stock Outstanding With A Price Per Share Equal To 12 There Are 1 (101.2 KiB) Viewed 35 times

Question 4 (22 marks) a) A firm has 1,500,000 shares of stock outstanding with a price per share equal to $12. There are 8,000 bonds outstanding, priced at $1,125 each. The cost of equity is 12 percent, the cost of debt is 8 percent, and the corporate tax rate is 32 percent. What is the WACC? The following is the WACC equation: (5 marks) E -T. WACC=Pk(1-1)+1 b) From the perspective of the Performance Management, what are the two categories of long- term value drivers? (Hint: Think of the Value Driver Tree) (4 marks) c) You have estimated the NOPLAT for each of the divisions in a three-division firm at $20 million, $30 million, and $50 million, respectively, for Divisions A, B, and C. Using these figures, you assume that Divisions A, B, and C contribute 20, 30, and 50 percent, respectively, to overall firm value. Is this an appropriate valuation technique? Why or why not? (6 marks) d) Discuss whether environmental sustainability matters in creating value for shareholders. (7 marks)