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Corporate Telecom Services Products & Systems

MV of Assets 100% 75% 25%

Bond rating A-/BBB+ A BB

Pretax cost of debt 5.88% 5.74% 7.47%

Tax rate 40% 40% 40%

After-tax cost of debt 3.53% 3.44% 4.48%

Equity Beta 1.15 1.04 1.36

R(t) 4.62% 4.62% 4.62%

R(m) 10.12% 10.12% 10.12%

R(m) - R(t) 5.50% 5.50% 5.50%

Cost of equity 10.95% 10.34% 12.10%

Weight of debt 22.20% 22.20% 22.20%

Weight of equity 77.80% 77.80% 77.80%

WACC 9.30% 8.81% 10.41%

Using Corporate WACC Telecom Products & Services

NOPAT 1,180.00$ 480.00$

ROC 9.10% 11.00%

EP (25.73)$ 74.25$

Using Divisional WACC Telecom Products & Services

NOPAT 1,180.00$ 480.00$

ROC 9.10% 11.00%

EP 37.84$ 25.82$

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Comments

Given

Given

Given

Given

Given

Beta

Risk Free Rate

Overall Return of the stock market 9.21% Corp WAAC basd on wieghted MV Assets

Market risk premium

Remains constant

Remains constant