Airbus is intending to buy machinery to build aero-plane wings for the A380 plane financed with debt costing 10%

Airbus is intending to buy machinery to build aero-plane wings for the A380 plane financed with debt costing 10%

Airbus is intending to buy machinery to build aero-plane wings for the A380 plane financed with debt costing 10%

before tax. Airbus mixes debt and equity in its capital structure. The market return is 15%, the Treasury Bill pays 5% and Airbus has a beta of 1.75. Debt has a 40% weight and common equity has a 60% weight of the firm’s capital structure. Airbus corporate tax rate = 30%.

a)     Calculate Airbus weighted average cost of capital showing all your workings.

b)     Briefly explain what you would recommend to the management of

Airbus is intending to buy machinery to build aero-plane wings for the A380 plane financed with debt costing 10%

before tax. Airbus mixes debt and equity in its capital structure. The market return is 15%, the Treasury Bill pays 5% and Airbus has a beta of 1.75. Debt has a 40% weight and common equity has a 60% weight of the firm’s capital structure. Airbus corporate tax rate = 30%.

a)     Calculate Airbus weighted average cost of capital showing all your workings.

b)     Briefly explain what you would recommend to the management of